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Short & Leveraged BOOST ETPs gain allure as Swiss Franc roils FX, CFD and spread bet firms


Short and leverage ETF specialist WisdomTree Europe saw assets under management (AUM) hit a record USDUSD182 million last week, just as some spread betting and CFD firms hit trouble on the back of the Swiss National Bank’s (SNB) move to remove the Swiss Franc’s 1.20 fix to the Euro.  

Over the past month since 15 December 2014, the Euro has fallen 7.45% against the USD and 3.8 % versus GBP. Last Thursday’s unprecedented move by the SNB resulted in reports of the CHF rising by more than 30% initially versus the Euro. Currently the Euro is down 18% versus CHF.
This unexpected sharp rise in CHF caused many investors’ FX positions to be closed out, while some spread bet providers are at risk of insolvency through either trading losses or client’s not being able to meet margin calls to cover their losses.  It is widely believed that users of spread bets and CFDs can leverage their FX positions up to more than 50x. By comparison, BOOST ETPs offer a factor of daily leverage ranging from 1 to 5X; and as this leverage is inside the product, so you never can lose more than your investment in the product.  Last week’s actions highlighted the strengths of short and leveraged ETFs and ETPs in this type of market move.
Hector McNeil, Co-CEO of WisdomTree Europe, says: “We believe that when trading leveraged instruments, investors’ interests are best served through a listed product versus an OTC product. Through an ETP, clients get a transparent, liquid exposure with counterparty protections whereby they cannot lose more than their original investment. The recent volatility in the Swiss Franc and the resultant losses investors experienced in the CFD and spread betting world, plus the counterparty exposure the investor is exposed to against the CFD and/or spread betting provider, highlights the strengths of the ETP product in contrast.”

Nik Bienkowski, Co-CEO of WisdomTree Europe, says: “One of the main reasons we launched short and leveraged Boost ETPs in December 2012 was because investors were telling us they wanted a robust alternative to CFDs and Spread Betting. As a result, over the past 12 months BOOST ETP’s AUM increased 296% to USD182m (as at 16.1.15) and monthly exchange trading volumes increased by approximately 600% to USD350m (to 31.12.14). Recently volatility in the markets has further highlighted the benefits of S&L ETPs.”

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