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Volatility Shares Trust has filed with the U.S. Securities and Exchange Commission (SEC) for 27 new highly leveraged ETFs, including the first-ever 5x leveraged ETF aimed for the U.S. market. This filing comes amid a significant spike in market volatility, with the CBOE Volatility Index (VIX) increasing by over 55% from October 1 to October 16, 2023.
Leveraged ETFs, which now account for 33% of all new ETFs, number around 900 in total on U.S. exchanges but only constitute 1% of the ETF industry’s $12 trillion in assets under management. Major companies targeted for these ETFs include NVIDIA, Tesla, Amazon, and Palantir. However, concerns remain regarding the risks of leveraged products compounding market losses, particularly with the potential introduction of 5x leverage.
The SEC is currently not reviewing new filings due to a federal government shutdown, but if approved, Volatility Shares’ ETFs could become effective 75 days after submission. Critics warn that such additions might exacerbate market sell-offs, as evidenced by JPMorgan’s report estimating $26 billion in leveraged ETF selling worsening a market downturn on October 10, 2023.
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