RJ bans double long/short etf's

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Mar 16, 2009 2:26 pm

A complince memo was out last week.  It essentially bans FA's from buying leveraged ETF's.   If you attempt to enter a buy order, it says security restricted.  No if's, and or butt's about it.   Compliance is getting alot of pushback but I bet they will stick to their guns.

 
This also goes for 3x etf's as well.
Mar 16, 2009 2:28 pm

Wow...did they say what prompted their decision?

Mar 16, 2009 3:11 pm

Their argument had to do with slippage.  The fact that double long etf's always don't follow the basket.  Case in point take a look at fxp and fxi.  Double long and short china 25. 

 
The funny thing it, our chief strategist has been recommending these to the field for years. Go figure.
 
I have made good use of skf and srs over the last 6 months.  We can still buy 1x etf's. 
Mar 16, 2009 5:00 pm

Oh lord.  I never thought I would see the day.  We can actually still buy these at Jones, but they have been banned by another firm.  I hope the sun still comes up tomorrow....

Mar 16, 2009 5:50 pm

These inverse and double inverse investments are absolutely horid. You would think they would work exactly like a hedged position using an option contract, and they do FOR EXACTLY ONE DAY. If the marketed changes direction they are re-priced and cumulative gains / losses re-calibrated. EG if the market went from 750 to 800 to 700 and back to 750 these things, if initially bought at 100, might end up at 85. (This is an example, the math to calculate this is really complicated and depends on a bunch of other assumptions).

 
Under no circumstances should these be bought in client accounts and left to dry. I learned this the hard way
 
 
 
Mar 16, 2009 7:28 pm
Been long FAS and short FAZ for months!!! (in margin account of course)
Mar 16, 2009 8:37 pm

This makes me wonder - i have been hearing a lot about RJ being broker friendly and letting you run your business the way you want. But this makes me wonder - comments from "the field"

Mar 16, 2009 9:31 pm

As an employer, one has an obligation to know which tools it may trust
its employees with. Sounds like RJ has decided its employees can't
handle certain tools. As a non-correlated example, would you, as an employer, give an epileptic dynamite and a
jack-hammer?

Mar 16, 2009 9:49 pm


Nice analogy.
 
Mar 16, 2009 9:52 pm

those Triples are like a futures contract

Mar 16, 2009 9:59 pm
Sportsfreakbob:

This makes me wonder - i have been hearing a lot about RJ being broker friendly and letting you run your business the way you want. But this makes me wonder - comments from "the field"

 
That's more to the point of my surprise earlier.  The ETFs in question may have some problems as have been referenced.  I have a hard time believing that there is never a time and a place for them although to be honest, I haven't used them and haven't done any due diligence on them.
 
My consternation is more towards RJ's heavy-handed control from the top.  This sounds like RJ's variable annuity policy, and frankly, like a page from the Edward Jones playbook...if we decide something is complicated and/or prone to be misused, never mind the fact that it is a legal and widely-used investment, we'll simply outlaw it so we don't have to police it.  I'm not trying to beat up Jones here...I understand that they aim to keep the playbook simple due to the number of new reps in the field under their umbrella.
 
Ray Jay, on the other hand, as an indy B/D, should be hiring experienced reps and should treat them as such.  I would have a problem with that kind of heavy-handed compliance.  As an independent, I resent managing compliance to the lowest common denominator (ie, penalizing and restricting me simply because someone else has shown themselves to be incompetent.)
Mar 16, 2009 10:02 pm
YHWY:

As an employer, one has an obligation to know which tools it may trust its employees with. Sounds like RJ has decided its employees can't handle certain tools. As a non-correlated example, would you, as an employer, give an epileptic dynamite and a jack-hammer?

 
My problem with your analogy is that it assumes all employees are epileptic.
Mar 16, 2009 10:10 pm
YHWY:

As an employer, one has an obligation to know which tools it may trust its employees with. Sounds like RJ has decided its employees can't handle certain tools. As a non-correlated example, would you, as an employer, give an epileptic dynamite and a jack-hammer?



To echo Indyone's point - which is exactly what i thought when i read your post YHWY, tHats fine, and i understand your point - but what about the independents - independent is just that - independent - why go indie if you are going to have restrictions that assume you need to be prevented from exercising bad judgement.

Mar 16, 2009 10:13 pm
CDO Squared:

those Triples are like a futures contract

 
Not even close.
Mar 16, 2009 10:22 pm
Sam Houston:
CDO Squared:

those Triples are like a futures contract



Not even close.





3% dow move give u 9% move (200 point dow move)



how much does 1 s and p contract move in 200 pt dow day?

% wise ($500 a point)



im too dumb to do math



your right not a real commod.

but pretty high powered for freakin listed stock.   



futures are Heroin.   these little bad boys a line of coke?

Mar 16, 2009 10:41 pm

My point was that, obviously, RJ has perceived risk/liability of its brokers using certain tools (i.e. double/triple leveraged ETF's), nothing more, nothing less. Not all Indy's are created equal. I strongly suspect that RJ has evidence to back up its policy decision. Don't like their conclusion? Take it up with them or vote with your feet.

Mar 16, 2009 10:41 pm

i know.    freak show ADD i guess

no patience.

its a sickness that spreads.



my wife and gals and guys on team start sounding like me in emails.

its annoying getting them



somethimes i read them and am like WTF?

speak English dumb ass



Its like a STD i guess





Mar 16, 2009 10:48 pm

They are dangerous. Cramer was ranting about them.

Whatever the witch Doctor BS science projects inside these things, they do not act like they are suppose to.   

It seems like at market extremes (financial puts, China on upside etc) they accelerate up or down more then they should relative to underling index.



what was the last Wall Street product these MIT mensa math boys put together?



oh yea.....CDO's,SIV's,CDS.   

how'd that work out for you?



end of the free world? (time will tell)

Mar 16, 2009 10:59 pm
CDO Squared:

They are dangerous. Cramer was ranting about them.
Whatever the witch Doctor BS science projects inside these things, they do not act like they are suppose to.   
It seems like at market extremes (financial puts, China on upside etc) they accelerate up or down more then they should relative to underling index.

what was the last Wall Street product these MIT mensa math boys put together?

oh yea.....CDO's,SIV's,CDS.   
how'd that work out for you?

end of the free world? (time will tell)

 
Well if Cramer's again 'em, I'm again 'em.
Mar 16, 2009 11:42 pm

cramer is annoying

cramer lies

cramer is whip-saw boy

cramer is a know-it-all



but the sob is a gamer

went on with stewart

takes his hits

gets up

shows up everyday

always swinging

puts nads on line



for some reason I respect the guy