Frequently Asked Questions
Leverage Shares exchange traded products (ETPs) seek to deliver three times (3x), two times (2x) & minus one time (-1x) the daily performance of individual household name stocks.
Leverage Shares ETPs:
- Can be efficient tools for gaining magnified exposure to individual stocks
- Achieve leverage through margin borrowing
- Have physical ownership of the underlying stocks, and therefore do not use swaps or other derivatives to achieve their exposure
- Do not have credit risk, because each series of the special purpose vehicle (SPV) has physical ownership of the underlying stocks and does not use derivatives, like swaps, to achieve its leverage
- Trade in real time on the London Stock Exchange (LSE) and Euronext Amsterdam (XAMS)
- Prevent investors from losing more than their initial investment
The term “Exchange Traded Product” (ETP) is a broad term that encompasses Exchange Traded Funds (ETFs), Exchange Traded Commodities (ETCs), and Exchange Traded Notes (ETNs). ETPs seek to provide returns based on the price movements of an underlying asset or benchmark, such as an index, commodity, or individual stock. However, ETFs, ETCs, and ETNs represent different structures for achieving this exposure and can pose different risks.
ETPs, such as ETCs and ETNs, are structured as debt securities, but unlike conventional bonds, these instruments pay no interest and are not rated. ETPs can give investors a means of diversifying investment portfolios without the need to:
- Enter into swap agreements or forward contracts
- Take physical delivery of the underlying commodity
- Hold securities that constitute the underlying index
Importantly, ETPs are different than ETFs in a number of ways. ETPs (including ETCs and ETNs) are not funds, and therefore lie outside the remit of UCITs — the Undertakings for Collective Investments in Transferable Securities.
However, while ETPs are not UCITS compliant, they may be UCITS eligible. This means that they are investments which — while again not themselves compliant with UCITS — are capable of being an eligible investment for another UCITS fund.
Leverage Shares Exchange Traded Products (ETPs) are debt instruments issued by a special purpose vehicle (SPV). Each ETP is a separate Series of the SPV, and is a debt security that delivers the returns of the assets held by the Series. Each Series invests its own assets and the assets borrowed on margin in a single stock, such as the common stock of Apple Inc. (AAPL), to achieve leveraged exposure to that equity as per its investment objective.
- Exposure to the underlying stock is managed to deliver two times the return (gain or loss) of the underlying stock on a daily basis (net of fees and expenses)
- Leverage Shares do not have credit risk because each Series of the SPV has physical ownership of the underlying assets and does not use derivatives, like swaps, to achieve its leverage
- Each ETP is fully collateralized, as its subscription proceeds are invested directly in shares of the underlying equity security, effectively negating potential credit risk
- Leverage Shares ETPs have access to institutional pricing for margin borrowing, and therefore can be a cost-effective means for investors to gain leveraged exposure to individual stocks
- Experienced investors with knowledge of leveraged Exchange Traded Products (ETPs)
- Investors with high risk tolerance
- Investors who can afford to lose some or all of their investment
- Investors who understand the daily compounding of leveraged ETPs and its effects on long-term returns
- Investors who have the time and ability to monitor their investments on a daily or intra-day basis
Experienced investors and market participants may use Leverage Shares Exchange Traded Products (ETPs) for a variety of strategies, including but not limited to:
- Responding to technical indicators on particular individual stocks
- Trading the volatility and the directionality of individual stocks
- Positioning or responding to earnings and news announcements
- Reacting to overnight movements in foreign markets, which may carry momentum into the home market
- Hedging existing exposures in a portfolio
Leverage Shares Exchange Traded Products (ETPs) can be traded through brokerage accounts that have the ability to trade products listed on the London Stock Exchange, Euronext Amsterdam and the Chicago Board of Options Exchange.
ETPs that are denominated in currencies different from that of the underlying stock are priced using interbank exchange rates. These are the ultracompetitive rates used by banks to transfer money between themselves.
Interactive Brokers is the clearing broker for Leverage Shares Exchange Traded Products (ETPs). For more information on our preferred providers, please see the ‘About’ page.
The Margin Rate for each Leverage Shares ETP is the respective Benchmark Rate plus one percent (1%). Leverage Shares uses internationally recognized benchmarks on overnight deposits as a basis for determining the Benchmark Rates. For each ETP, the Benchmark Rate is determined by the base currency of the underlying equity security for the respective ETP, according to the following schedule:
Base Currency of Underlying Equity Security Benchmark Rate
GBP GBP LIBOR (Overnight Rate)
USD Fed Funds Effective (Overnight Rate)
EUR EONIA (Euro Overnight Index Average)
All product costs are detailed in the relevant exchange-traded product (ETP) FactSheet and KIDs, which are available on each individual ETP page. Generally, the following fees are applicable:
1. Arranger Fee: Charged daily, annual rate of 0.75% of the ETP Value held by securityholder;
2. Daily Margin Interest: Designated benchmark rate + 1%*.
1. Arranger Fee: Charged daily, annual rate of 0.75% of the ETP Value;
2. Securities Borrowing Fee and Interest on Cash: The current Securities Lending Fee is published on leverageshares.com on a daily basis).
- Higher Risk/Reward: Leveraged Exchange Traded Products (ETPs) provide magnified exposure to an underlying asset or benchmark and therefore can both gain or lose money much faster than investing in the underlying investment without leverage
- Daily Compounding Risk: To meet its objective of doubling the daily returns of an asset’s or benchmark’s performance, the leveraged ETP must rebalance, or re-leverage, its position every day. Over a longer holding period, the daily rebalancing may result in returns that do not equal the specified multiple of the benchmark due to the effects of compounding
- Investors can lose up to, but not more than, the full value of their investment, particularly in a volatile market environment
- The full risk warnings should be read before purchasing a leveraged ETP (they can be found here)
The index providers are the New York Stock Exchange and Stoxx Ltd., depending on the ETP. You can find out the index provider for each ETP on their respective product pages under “Our ETPs”. More information about the index providers and the indices can be found at https://www.nyse.com/index and https://www.stoxx.com/indices
Yes, several Leverage Shares Exchange Traded Products (ETPs) (e.g., TSLS, AMZS, APLS) provide short exposure to the underlying security.
No. Leverage Shares uniquely replicates the payout of its ETPs physically, so it holds the stocks underlying its leveraged ETPs and receives the dividends on such stocks. However, such dividends are reinvested in more shares of the underlying stock.
Leverage Shares is entitled to benefits under the U.S.-Ireland income tax treaty with respect to any U.S. source dividends it receives. Accordingly, Leverage Shares is subject to 15% withholding tax on U.S. source dividends.
No: Payments on Leverage Shares ETPs which receives US source dividends on are not subject to U.S. federal withholding tax under section 871 (m) of the Internal Revenue Code of 1986. Accordingly, brokers do not need to take any action with respect to section 871 (m).