The SEC Has Cleared Six 3x Leveraged Products, Bitcoin and Ether Among Them. None Can Trade Yet.

The Securities and Exchange Commission on October 2 approved a Cboe BZX Exchange rule change allowing the exchange to list and trade six exchange-traded products designed to return three times the daily performance of a single benchmark. Two of the six track crypto assets. The products are series of VS Trust, sponsored by Volatility Shares LLC, and would list under BZX Rule 14.11(e)(4), the standard for Commodity-Based Trust Shares. The exchange filed the proposal in August and the Commission noticed it on August 14 as Release 34-106137; the approval order is Release 34-106577.

The Six Products

• 3x Bitcoin ETF
• 3x Ether ETF
• 3x Gold ETF
• 3x Silver ETF
• 3x Crude Oil ETF
• 3x Natural Gas ETF

Approval Is Not Permission to Trade

Two separate approvals have to line up before shares change hands. The first is the exchange listing standard, which is what the Commission granted on October 2: Cboe BZX may now list these series. The second is a registration statement on Form S-1 under the Securities Act of 1933, which has to become effective before shares can be offered to the public. That has not happened, and the approval order set no date for it. Until it does, the products exist on paper and on an exchange rule, not on a screen.

What 'Three Times Daily' Means, and What It Does Not

The objective is stated per day. Each fund rebalances its exposure daily so that the next day's move is again three times the benchmark's move. The consequence is that performance over any period longer than one day is a product of compounded daily results, not three times the period result. A benchmark that falls 10% and then rises 11.1% ends roughly flat. A 3x fund tracking it falls 30%, then rises 33.3% from the lower base, and ends below where it started. The effect is larger the more the benchmark oscillates, and it is adverse in choppy markets regardless of direction. This is arithmetic, not a fee, and it applies to every daily-reset leveraged product.

How the Exposure Is Obtained

Per the August notice, the funds pursue their objectives primarily through futures contracts — first- and second-month contracts on the relevant benchmark — held alongside cash and cash equivalents. Where the primary instruments are unavailable, the filing contemplates futures beyond the second month, other exchange-traded funds and products, and exchange-traded options. The sponsor increases and decreases the number of benchmark futures contracts held to accommodate purchases and redemptions and to track changes in the value of the benchmark. Exposure obtained through futures brings its own costs — the roll between expiring and later contracts can be positive or negative depending on the shape of the futures curve — which sit on top of the compounding effect described above.

Why It Is Notable

US-listed leveraged exposure to crypto has previously come at 2x. A 3x daily objective on bitcoin and ether, listed under a commodity-trust standard rather than as a registered fund under the Investment Company Act, extends both the leverage available and the structure through which it is offered. The same order covers four conventional commodities, which is a reminder that the listing standard at issue is not crypto-specific.