Boost to list world’s first short and leveraged FTSE 250 ETPs

Jul 1st, 2013 | By | Category: Alternatives / Multi-Asset

Boost, a specialist London-based provider of short and leveraged exchange-traded products (ETPs), has unveiled plans to launch the world’s first short and leveraged ETPs based on the FTSE 250 index. The products will make their debut on the London Stock Exchange (LSE) early this month.

Boost to list the world’s first short and leveraged FTSE 250 ETPs

The FTSE 250 is widely seen as a more accurate barometer of the UK economy than its more famous sibling, the FTSE 100.

The FTSE 250 tracks the performance of mid-cap stocks traded on the LSE. It consists of the next 250 companies ranked by market capitalisation outside of the FTSE 100 and is widely seen as a more accurate barometer of UK-specific stocks – and of the UK economy in general – than the FTSE 100 Index, which has a significant international flavour.

The new products, the Boost FTSE 250 1x Short Daily ETP (1MCS) and Boost FTSE 250 2x Leverage Daily ETP (2MCL), offer inverse and leveraged exposure, respectively, to the FTSE 250 index. This means that should the FTSE 250 rise 2% on a particular day, the short product (1MCS) will fall by 2% and the leveraged long product (2MCL) will rise by 4%, excluding fees.

The launch of FTSE 250 ETPs will complement Boost’s offering of three-times long and short FTSE 100 ETPs, which have been the provider’s most popular products, having contributed approximately 80% of product-wide daily trading volumes.

Commenting on the launch, Hector McNeil, Co-CEO of Boost, said: “Boost is very proud to introduce the world’s first short and leveraged ETPs based on the FTSE 250 benchmark. The introduction of Boost FTSE 250 1x Short Daily ETP and Boost FTSE 250 2x leveraged Daily ETP are valuable additions to an investors’ tool kit.”

Boost’s decision to launch -1x and 2x products on the FTSE 250, thus deviating from its traditional habitat of 3x products, reflects in part investor demand but also the reduced liquidity of FTSE 250 stocks, which makes hedging these products more costly.

Interestingly, Boost has also announced that it will be rolling out new products offering -1x, -2x and 2x exposure to the FTSE 100. The likely motivation for these products, which will sit alongside its existing -3x and 3x offering, is to better reflect investor demand, with investors demonstrating a preference for products with less in-built leverage, but also to offer a competitive, cheaper alternative to comparable products offered by rivals.

In general, these types of products have been gaining traction lately as investors come to recognise their many uses, which include, among other things, hedging and short-term tactical trading. According to data complied by Boost, demand for short and leveraged ETPs has increased steadily over the past few years, with global assets now reaching just shy of $50 billion.

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