ProShares withdraws some highly leveraged ETF plans after SEC review halt

Core Viewpoint - ProShares has withdrawn its registration request for highly leveraged ETFs following a warning from the U.S. Securities and Exchange Commission (SEC) regarding risk exposures and the review of such plans [1][2]. Group 1: SEC's Regulatory Actions - The SEC sent letters to nine ETF providers, including ProShares, requesting clarity on risks associated with funds aiming to track up to five times the performance of underlying stocks [2]. - The SEC's concerns are based on Rule 18f-4 under the Investment Company Act of 1940, which mandates that a fund's value-at-risk must remain below 200% of an appropriate reference portfolio [5]. - The SEC suggested that fund managers revise their strategies to comply with regulations or withdraw their filings [5]. Group 2: Market Context and Trends - Leveraged ETFs have gained popularity among retail investors due to bullish market sentiment, speculative trading, and innovation in products, particularly around single stocks and cryptocurrencies [4]. - The scrutiny from the SEC adds pressure to the leveraged ETF market, which continues to attract retail investors despite concerns over complexity and risks [6]. - The ProShares UltraPro QQQ ETF, the largest leveraged ETF by assets under management, targets three times the daily performance of the Nasdaq 100 index and has seen over 40% gains this year, highlighting the potential for high returns alongside increased risks [7].