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BOOST ETP To Launch Europe's First Specialist Platform Of Leveraged And Short Exchange Traded Products

Monday 03rd December '12

  • up to 100 different ETPs across all asset classes over the next two years
  • focus on 3x leveraged and 3x short ETPs
  • fully collateralised to minimise counterparty risk
  • global leveraged and short ETP assets currently stand at around $43bn, with over $8bn in 3x leveraged ETPs

BOOST ETP (BOOST), the independent ETP provider, today announces it will be launching a platform of leveraged and short exchange traded products (ETPs). BOOST will be the first ETP provider in Europe to focus on issuing 3x leveraged and 3x short ETPs; these have been extremely successful in the US market and BOOST expects a similar level of success in Europe over time. BOOST expects to list up to 100 different ETPs across all asset classes in the next two years, starting with a broad range of equities and commodities.

BOOST is launching the leveraged and short ETP platform due to investor demand for secure, transparent and liquid ETPs. With global leveraged and short ETP assets having grown to approximately $43bn with over $8bn in 3x leveraged ETPs, it is clear that investors have widely accepted the ETP structure as a vehicle of choice for leveraged and short exposure to liquid underlying markets. Demand for leveraged and short products has also increased over the past few years as many financial markets have trended sideways, resulting in volatile and poor long term returns. Leveraged and short ETPs make it possible to take advantage of this short term volatility in world financial markets.

BOOST ETPs will be suitable for sophisticated and experienced investors and BOOST will provide significant educational support for investors to ensure they can maximize their understanding and usage of the products.

With BOOST's leveraged and short ETPs, investors have instant leverage to highly liquid underlying markets in one single trade. Investors can achieve simple exposure to leveraged returns without having to borrow the additional funds to gain the additional long exposure or the need to borrow underlying shares, and then sell those shares in order to short the market.

BOOST leveraged and short ETPs are designed to provide short and/or leveraged exposure to the daily changes in the world's most liquid and widely followed investment and financial indices. For example, if the NASDAQ 100 Index® rises by 1% on a day, then the BOOST NASDAQ 100® 3x Leverage Daily ETP will rise by 3% on that day. Conversely, if the benchmark falls by 1% on a day, then the BOOST NASDAQ 100® 3x Short Daily ETP will rise by 3% on that day.

The new ETPs will help expand the investment horizons of investors and will allow them to execute a wide variety of strategies which will include:-

  • leverage the daily returns of an investment for the same capital as a non-leveraged trade
  • hedge existing positions in one simple trade
  • use a long or short strategy to take advantage of any rises or falls in the market, especially in a sideways trending market
  • use in pairs to trade and take advantage of undervalued assets
  • get short the market efficiently and cheaply without having to arrange and finance complex stock borrowing positions

Source – Bloomberg and Boost ETP (correct as of 30 November 2012)

Investors will be able to buy and sell the new BOOST ETPs on the London Stock Exchange, through regulated brokers or BOOST's network of approved market makers and authorised participants. BOOST ETPs will be traded with all the same order types available to equities, including market, limit and stop orders. The minimum trade size is one security, settlement is T+3 (trade date plus three business days) in CREST, and each BOOST ETP will be subject to a highly competitive management charge.

BOOST has agreed with Getco Europe Ltd to be the London Stock Exchange Designated Market Maker for all the ETPs to be listed. This will ensure investors will be able to trade highly efficient bid offer spreads throughout the trading day. Getco is a world class market maker in ETPs and other Exchange listed products. They are one of the leading ETP LMMs (Lead Market Makers) on the NYSE and provide liquidity on over 50 markets globally.

BOOST ETPs will be backed by a robust risk management system, making them unique. Unlike a UCITS fund which can allow up to 10% exposure to each counterparty, BOOST ETPs will be over collateralised on a daily basis, using a liquid and diversified mix of sovereign bond and equities. The collateral will be delivered to BOOST Issuer PLC's account held with one of the world's leading custodians. The list of posted collateral will be made available on BOOST has delivered a unique and ground breaking collateral system where (i) depending on the credit rating of BOOST's counterparties, the mix of sovereign bonds held in the posted collateral will slowly increase, and (ii) no cash or collateral will be delivered by BOOST to a counterparty unless BOOST has received payment first.

Co-CEO, Hector McNeil comments:
"We believe that the leveraged and short ETPs are exciting additions to the European ETP market and introduce investment products which investors currently demand, but are not yet available. Given the persistence of low, long term returns and sideways trending financial markets over the past five or more years, BOOST's 3x leveraged ETPs should now give sophisticated investors valuable new tools to potentially enhance their investment returns or hedge market risks."

The key benefits of BOOST ETPs are:-

  • an efficient structure and comparatively low cost
  • highly liquid products with multiple market makers and authorised participants
  • trades and settles the same as an equity
  • transparent structure with world class service providers supporting it
  • best of breed products, including a fully collateralised structure for counterparty risk management

Co-CEO, Nik Bienkowski also commented:
"BOOST intends to become a significant player in the European ETP market. BOOST's 3x leveraged and short ETP platform is our first foray into this market and indicates our ambition and ability to add value to the ETP industry. This can be seen with BOOST's platform of equity and commodity ETPs, and BOOST's unique collateral structure. We look forward to creating many more value-added products in the near future".