Defiance ETFs has submitted paperwork to the US Securities and Exchange Commission (SEC) for a series of new leveraged funds. These funds would seek to double the moves of certain individual stocks, including heavily traded names like Nvidia, Microsoft, Meta Platforms, Palantir Technologies, Tesla, Advanced Micro Devices, Micron Technology, Marvell Technology, and SpaceX, as well as some popular ETFs. This proposal marks a new development in the leveraged ETF market, which is already under regulatory scrutiny.
Unlike existing 2x leveraged ETFs that reset daily, Defiance's proposed funds would reset their exposure roughly every hour, recalibrating up to six times during a single trading day. This hourly reset mechanism would allow investors to make leveraged bets over much shorter windows. For example, an active trader could use these products to target twice a stock's movement during a specific hour, rather than over an entire trading day, which could be particularly attractive around events like earnings announcements or product launches.
While this increased precision could offer powerful gains if a stock moves consistently in one direction, it also introduces greater complexity and potential volatility. The hourly reset means that the path a stock takes during the day becomes significantly more important, as gains and losses compound repeatedly within a single session. This makes the products more akin to highly targeted trading tools than conventional investment vehicles.
The proposal comes at a time when the SEC is closely monitoring the rise of leveraged ETFs, particularly those tied to individual stocks. Regulators have previously blocked products offering three or five times a stock's daily performance. Defiance itself already warns investors that its existing 2x products are designed for short-term trading and require active monitoring. The proposed lineup, focusing on AI, semiconductor, memory, and technology stocks, indicates a demand for increasingly precise and specialized bets on individual stocks, even as this greater precision is accompanied by increased complexity for investors. If approved, the funds could begin trading as early as November.
