Investors that have seen their portfolios structured with ETFs mirroring the trend on a broader market index, such as the S&P500, would have to be very cautious in understanding the products; while on the other hand banks structuring these products for the retail clients could spark cascading effects on the broader indexes and markets. In fact
In this article has been observed the DBPG ETF, also available as XS2D ETF. This ETF product, marketed by DBK, BNP, GLE, STT, does mirror the S&P500 in a synthetic structure made of an alternative basket of stocks through unfunded swaps, non-currency edged with a 2X leverage correlation with the S&P500. Obviously, these synthetic ETFs products do pose a double challenge: one the volatility and double leverage exposure for retail clients and small investors, while also posing a much consistent challenge on a financial stability risk, as the 2X Double leverage DBPG ETF mirroring the S&P500 can spark cascade selling effects on the broader S&P500 the underlying index, and the basket of stocks on which the ETF has been structured. This factor poses a challenge for banks marketing and selling these ETFs, as the DBPG ETF, in fact, the ETF basket of stocks gets structured in a synthetic manner with swaps, through another counterparty bank, although the synthetic swaps are currency unhedged, thereby posing a risk management challenge for the banks issuing the synthetic double leverage ETF, that have the long stock tail exposure in the swap. Adverse market scenarios can spark cascade effects from the stock swaps, forcing banks to sell then the equities and stocks utilized to synthetically build the ETF. So the correlation between index, stocks and their leveraged synthetic swap products can become very rapidly a risk management challenge for banks balance sheets.
DBPG ETF € 128.46
The ETF trendline has drifted forcefully lower by -3.65% on the XETRA and -4.28% on the Frankfurt stock exchange, highlighting the double leverage exposure to rising market volatility. Thereby, could be possible to see in the DBPG ETF a consistent correction of -22.5%, toward a 61.80 Fibonacci retracement DBPG € 99.12 euro. The RSI oscillator also signals a down drifting momentum.