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Boost ETP welcomes ESMA’s and EBA’s comments regard complex products and CFDs

Wednesday 03rd April '13

Boost 3x leverage ETPs offer magnified returns in a secure manner
Investor education is key to using leverage products
Investors should understand each product before buying

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have published a warning to retail investors about the dangers of investing in contracts for difference (CFDs).

Amid flat and low-return markets, BOOST ETP recently launched a platform of 3x leverage and 3x short equity ETPs and commodity ETCs.  The platform enables investors to gain leverage exposure to rising or falling markets in order to hedge their portfolio or magnify returns.  Over the past five years, the return from holding the FTSE 100 was only 2% per annum, however the average daily change in the FTSE 100 over this period was 1.05%. 

ESMA and the EBA are concerned that during the current period of low investment returns, inexperienced retail investors across the EU are being tempted to invest in complex financial products, which they may not fully understand and which can end up costing them money they cannot afford to lose.

Boost agrees with the two authorities’ comments, that Investors should only consider trading in CFDs if they have extensive experience of trading in volatile markets, if they fully understand how these operate and have sufficient time to manage their investment on an active basis.

BOOST ETP launched its award-winning 3x leverage and 3x short ETP platform for exactly these reasons.  Boost feels that education and transparency are key to any financial product, especially for those products which may either be perceived to be complex, may be short and/or leveraged, or may potentially behave differently from what an investor might expect.

BOOST believes that advisor education, product training and transparency regarding a product’s risks are vital to investors’ ability to evaluate whether a product, such as a leverage or short ETP is suitable for the investor’s goals, objectives and financial position.

Unlike many CFDs and highlighted by ESMA and the EBA, a BOOST ETP is transparent, trades on Exchange, discloses all fees, uses liquid and transparent independent indices. BOOST ETPs are fully collateralised each day, using highly liquid equities and sovereign bonds, and which is disclosed on Boost’s website.  Additionally, unlike CFDs, investor’s in BOOST’s 3x leverage and 3x short ETPs cannot lose more than value of the original investment.

Hector McNeil, Co-CEO of BOOST ETP commented: “One of the main reasons that we focused on 3x leverage and 3x short ETPs was because investors were telling us they wanted a robust alternative to CFDs and Spread Betting. Many investors were concerned that they were often ‘closed out’ during volatile markets and missed the recovery in the markets when they occurred.  Investors also told us they were concerned with counterparty risk management following MF Global and World Spreads collapse.  As a result, BOOST ETPs are over collateralised, adding a layer of comfort missing from CFDs and Spread Bets. Other features such as multiple market makers, exchange traded and product transparency mean that BOOST ETPs are best of breed in the leveraged space.”