FINRA Raising Margin Requirements on Leveraged ETFs; FAZ, FAS
| 01 September 2009

FINRA posted an
announcement on its Web site notifying brokers that it is increasing margin requirements on leveraged ETFs and on uncovered options overlying leveraged ETFs.
The margin requirements are being increased because of the volatility and risk associated with leveraged funds. The margin balance requirements for the funds will be based on a factor "commensurate with their leverage."
We earlier
reported on the revised alert FINRA issued to investors. In a joint announcement with the SEC, the agency came out with a more substantial warning for investors, firming up its stance on the risks associated with the products.
It's unclear what impact the margin requirements will have on the sale of leveraged products such as Direxion Funds 3x Bear (FAZ) and 3x Bull (FAS). Leveraged ETF shares are often some of the most heavily traded shares in the markets. The requirements will go in effect December 1, 2009.