Leveraged ETFs and Late-Day Volume

Back in December, the Wall Street Journal‘s Tom Lauricella began looking into the impact that leveraged ETFs have on late-day trading volumes.

In the article, Are ETFs Driving Late-Day Turns?, Lauricella details the debate around the relationship between the rising popularity of leveraged ETFs and the large moves in the last hour of trading.

People that say that there is a connection point to large volumes associated with the daily portfolio adjustments made by brokers who deal in leveraged ETFs. Combine that with the large influx of money and new funds into the market and you have a force big enough to move the markets significantly at the end of the day.

The counterview is that the large end-of-day trading is a result of other factors such as the overall deleveraging of the market and the unwillingness of traders and market makers to hold positions overnight.

Lauricella mentions the UltraShort Financials ETF (SKF) and the UltraShort S&P500 ETF (SDS) in the article.

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