BOOST Lists 3x Long and 3x Short FTSE100 ETPs on The London Stock Exchange
Thursday 06th December '12
BOOST ETP (BOOST), the independent exchange traded product (ETP) provider, announces today that it has listed its first ETPs on the London Stock Exchange (LSE). The two ETPs are designed to return 3x the daily movement, long or short, of the FTSE 100 benchmark index.
- 3UKL will provide long exposure equal to 3x the daily change of the FTSE 100 Super Leveraged RT TR Index (less fees and adjustments).
- 3UKS will provide short exposure equal to 3x the daily change of the FTSE 100 Daily Ultra Short Strategy RT Gross TR Index (less fees and adjustments).
For example, if the FTSE100 rises by 1% on a particular day, then 3UKL will rise by 3% and 3UKS will fall by 3%. However, if the FTSE100 falls by 1% then 3UKL will fall by 3% and 3UKS will rise by 3%.
Demand for transparent short and leverage products has increased over the past few years with global short and leveraged ETP assets rising to $43bn1, as many financial markets have trended sideways, resulting in volatile but poor long term returns. Leveraged and short ETPs make it possible to take advantage of this short term volatility in world financial markets.
To highlight the potential opportunities now available as a result of short and/or leveraged ETPs, the average daily change in the FTSE 100 Total Return Declared Dividend Index, was 1.05% per day, over the past five years (to 30 November 2012). By comparison, a buy and hold investment in the same FTSE100 index over the same 5 year period was 10.4% (before fees), equating to 2.0% p.a.2
BOOST will specialise in providing sophisticated investors with leveraged and short ETPs which gives investors instant exposure to highly liquid underlying markets in one single trade. Investors can now get simple exposure to leveraged returns without having to borrow the additional funds to gain the additional long exposure, or the need to borrow the underlying shares and then sell those shares in order to short the market. BOOST will be providing significant educational support to the investment community with the aim of ensuring investors can maximise their usage of the products.
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 short term 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
Co-CEO, Hector McNeil comments:
"Today is a landmark day for BOOST as we list our first ETPs on the London Stock Exchange. We believe that BOOST FTSE 100 3x Leverage Daily ETP and BOOST FTSE 100 3x Short Daily ETP are exciting additions to the UK ETP market and introduce an investment product which investors currently demand, but are not yet available. 3UKL and 3UKS will provide 3x long and 3x short exposure to the daily change in the FTSE100 index.
"We have been experiencing low returns and sideways trending equity markets for several years now. The average daily change in the FTSE 100 index was 1% per day versus 2% p.a. over the past five years for a buy and hold investment. As a result, BOOST’s 3x leveraged and 3x short ETPs provide sophisticated investors valuable new tools to potentially enhance their investment returns or hedge market risks."3
The key benefits of 3UKL and 3UKS are:
- An efficient structure and comparatively low management fee of 75bps for 3UKL and 80bps for 3UKS
- Highly liquid products with multiple market makers and authorised participants
- Trades and settles like an LSE listed equity
- Transparent structure with world class service providers supporting BOOST
- Best of breed products, including a fully collateralised structure for counterparty risk management
Similar to Exchange Traded Funds (ETFs), BOOST ETPs are liquid, accessible and simple. BOOST ETPs can be created and redeemed on a continuous basis by market makers, matching the tremendous liquidity of the underlying markets tracked, and can be traded by investors on a regulated Exchange in the same way as any equity. BOOST ETPs will provide accurate and transparent leveraged and short exposure to recognised benchmarks in a single trade. In addition, BOOST leveraged and short ETPs require no borrowing of stock or funds to gain the relevant exposure. BOOST ETPs are simply priced off transparent indices published by world class index providers.
BOOST ETPs will be backed by a robust risk management 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.
Sudir Raju, Managing Director of ETP Relationships, FTSE Group, said: "We are delighted that BOOST has chosen to license FTSE indices as the basis for their inaugural product launch and look forward to continuing to provide transparent, liquid and innovative index structures to support the further expansion of their product suite."
To view the product list, please click here.
1Source: Bloomberg, BOOST ETP LLP
2Sources for this paragraph are from Bloomberg and BOOST ETP LLP
3Sources for this paragraph are from Bloomberg and BOOST ETP LLP
All rights in the FTSE 100 Super Leveraged RT TR Index and FTSE 100 Daily Ultra Short Strategy RT Gross TR Index (the “Indices”) vest in FTSE International Limited (“FTSE”). “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence.
The Boost FTSE 100 3x Leverage Daily ETP and Boost FTSE 100 3x Short Daily ETP (the "Products”) have been developed solely by Boost Issuer PLC. The Indices are calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote the Product and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Product. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the Products or the suitability of the Indices for the purpose to which it is being put by Boost Issuer PLC.