A suite of new STOXX indices from Qontigo underlie single-stock short and leveraged exchange-traded products (ETPs) issued by Leverage Shares, which provide an efficient and low-cost way to pursue leveraged strategies.
A total of 25 new indices have been introduced tracking strategies on 16 securities, including companies from Germany, the Netherlands and South Korea for the first time. ETPs on most strategies were listed on the London Stock Exchange on June 9.
The new products track inverse (-3x) and leveraged (+3x) investments in stocks of the following companies:
Also being introduced as part of this batch are 3x short ETPs on Microsoft, Amazon, Meta Platforms, Alibaba, Apple, Nvidia and Alphabet, expanding on existing strategies on those stocks.
“As major market indices enter bear territory and fixed income continues to disappoint, it’s paramount that active investors be equipped with the tools to protect their portfolios,” said Raj Sheth, Commercial Director at Leverage Shares. “We’re delighted to expand our unique range of physically-backed ETPs, which offer the targeted exposure needed — both long and short — to navigate the current volatile environment.”
Most traded ETP in London
Each index is calculated in real time and aims to replicate a leveraged return from the net-of-taxes performance of the underlying stock, adjusted for margin fees, borrowing costs, and interest earned or paid on the index notional. For example, the iSTOXX® Inverse Leveraged -3X SIE Index tracks three times the inverse of the daily return of Siemens.
The indices tap strong demand in the market for strategies that express high-conviction investment ideas, and enable investors to do so in a way that is rules-based and transparent, bringing robustness and neutrality to the final product. A 3x leveraged product on Tesla from Leverage Shares is this year’s most-traded ETP on the London Stock Exchange.1 Investors and traders can also access up to three-times inverse (short) Tesla ETPs.
This latest launch brings the total of single-stock short and leveraged products issued by Leverage Shares and tracking STOXX indices to more than 100, covering 55 stocks. For a full list, click here.
Competitive advantages of ETPs
Investors and traders have long used short and leveraged strategies with a directional view in mind, but such positions are also common for other tactical purposes such as hedging, managing portfolios or relative value trading. Traditionally, they have been implemented with futures, certificates and over-the-counter instruments such as CFDs. Pursuing the strategies through an ETP, however, brings cost, risk and operational benefits.
Among those benefits, an ETP does not require a margin account nor any margin levels. There are no extra costs for holding a position overnight. Unlike CFDs or futures contracts, the risk in ETPs is limited to the amount invested. Additionally, ETPs can bring tax efficiencies.2 Finally, there is no credit or counterparty risk as all investments are replicated physically, meaning they are backed by the underlying assets, and all transactions are cleared through a clearing house.
1 Data through April 2022, based on number of trades.
2 For example, withholding tax on US-source dividends is 15% for Leverage Shares ETPs, vs. 30% generally for non-US persons investing in US shares. Please note that STOXX indices use a 30% tax rate in their calculation.