ProShares Planning Short, Leveraged Regional Bank ETFs

by on March 2, 2010 | ETFs Mentioned:

ProShares, a leading provider of inverse and leveraged ETFs, has filed for approval on seven addition ETFs, including four “ultra” international ETFs and three products focusing on a popular regional bank index. The international ETFs complement four existing 200% inverse products, and include:

In June 2009, ProShares launched UltraShort products that seek to deliver 200% of the inverse of daily returns of the same four indexes. iShares currently offers ETFs designed to replicate the performance of three of these benchmarks, including EWZ (Brazil), EPP (Pacific ex-Japan), and EWW (Mexico). The Vanguard European ETF (VGK) is linked to the MSCI Europe Index.

Leveraged / Inverse Regional Banking ETF

In addition to the four 200% long international ETFs, ProShares has three funds based on the KBW Regional Banking Index in the works:

  • Ultra KBW Regional Banking (200% daily exposure)
  • Short KBW Regional Banking (-100% daily exposure)
  • UltraShort KBW Regional Banking (-200% daily exposure)

The KBW Regional Banking Index is an equal-weighted benchmark consisting of companies that do business as regional banks or thrifts. State Street’s KRE, which is designed to track the performance of this index, has been one of the best-performing ETFs to date in 2010, gaining more than 10% on the year. This impressive performance comes after this sub-industry missed out on last year’s rally: KRE was one of the worst-performing equity ETFs last year.

Already this year more than 20 banks have been closed, and FDIC officials said that the pace of bank seizures is likely to accelerate in coming months. The number of banks on the “problem” list increased to 702 in the fourth quarter from just 552 three months earlier (read more on regional bank ETF options in this feature).

If approved and launched, thees funds would join existing ETFs offering leveraged exposure to the broad financial sector. ProShares’ lineup includes ETFs providing 200% (UYG), -200% (SKF), and -100% (SEF) daily exposure to the Dow Jones U.S. Financials Index. Direxion’s Daily Financial Bull 3x Shares (FAS) and Bear 3x Shares (FAZ), which are based on the Russell 1000 Financial Services Index, are two of the most widely-traded ETFs, with average daily volumes of about 30 million shares and 61 million shares, respectively.

Expense ratios for all of the new ETFs are pegged at 0.95%, consistent with existing ProShares products.

Disclosure: No positions at time of writing.