Schwab Reviews Risky Exchange-Traded Products
Discount brokerage Charles Schwab is reviewing whether to add a warning when a customer is about to trade certain exchange-traded products, according to a Reuters story titled “Schwab considers warnings on controversial exchange-traded products.” Schwab’s position indicates the need for retail investors to be cautious when considering an investment in “esoteric” securities.
According to the Reuters report:
“The move follows the sudden plunge in an exchange-traded note called VelocityShares Daily 2X VIX Short-Term ETN, or TVIX, which lost 60 percent of its value last week.
‘It is under review, primarily because of the risk we saw in things like the TVIX. No one knew that those kind of things were going to happen,’ said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.
The warning would be similar to one that pops up when investors trade options related to volatility, which are more complex than stocks.”
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