From daily leverage to hourly leverage! The lessons from South Korea are not far behind, as Wall Street attempts even more extreme retail trading tools.

In a corner of the U.S. stock ETF market that is attracting significant regulatory attention, a shift towards ultra-short-term speculation is underway. Defiance ETFs has filed documents with the Securities and Exchange Commission (SEC) to launch a series of leveraged funds intended to double the price fluctuations of certain individual stocksnot measured by day, but by the hour. Leveraged exchange-traded funds (ETFs) have primarily been used to amplify the volatility of broad market indices, but now, using derivative tools, retail investors can increase their stakes in popular stocks. Defiance plans to compress the time window even further. Existing double-leverage funds typically aim to achieve twice the daily return of specific stock prices. The strategy proposed by Defiance effectively allows for multiple resets of this leveraged exposure within a single trading day. According to the relevant documents, the upcoming products will track the hottest technology stocks currently, including Meta Platforms Inc. (META.US), Microsoft Corporation (MSFT.US), NVIDIA Corporation (NVDA.US), Palantir Technologies Inc. (PLTR.US), and Tesla, Inc. (TSLA.US). These funds aim to maintain approximately double the risk exposure of the underlying securities through swaps or options contracts, rebalancing six times during each trading day, rather than just once at the close. The documents indicate that if approved, these funds will not use a single price for each reset but will employ time-weighted average prices for rebalancing. For example, suppose a trader expects NVIDIA Corporation to rise significantly due to a piece of news; they can buy the fund within a specific hourly window, targeting returns that are double the price increase during that period, rather than the cumulative increase for the entire day. When the next reset occurs, the new double target will be recalculated. For active traders, this means that leverage will be recalibrated closer to the actual entry points, and it also means that profits and losses will continuously accumulate and compound within the same trading session. Sylvia Jablonski, Chief Investment Officer of Defiance ETFs, stated, This design aims to provide investors with a differentiated way to express intraday views. Unlike seeking twice the returns from todays close to tomorrows close, hourly-reset products seek to achieve preset leverage multiples within a shorter, one-hour measurement period. The unveiling of this filing comes at a time when regulators are engaged in intense debates over how much such products should be permitted within the ETF industry. The SEC has recently slowed its approval process for proposals of threefold, fourfold, or even fivefold leveraged funds, while reviewing an increasingly aggressive wave of products. This wave of controversy has also spread beyond the United States. This summer, South Korean investors flocked to leveraged funds linked to SK Hynix (SKHY.US) and Samsung Electronics (SSNLF.US). However, the market subsequently faced severe losses, leading to public outcry against related products that even reached presidential levels, prompting tighter regulations. Since then, with regulators imposing more access hurdles for retail investors, the frenzy around leveraged ETFs in South Korea has cooled. South Korea now requires investors to complete five days of simulated trading before participation, leading to a significant decline in demand for certain popular leveraged products. ETF issuers have consistently emphasized that these types of products are trading tools rather than traditional buy-and-hold investments. The hourly reset takes this premise to an extreme. Every round of gains and losses becomes the starting point for the next cycle, causing returns to accumulate and compound within the same trading day. This mechanism can be profitable when stock prices steadily rise; however, if the market is volatile or declines, the same compounding effect can amplify losses and increase volatility drag. ETF analyst James Seyffart has expressed a certain level of caution regarding this. He stated, Im not entirely convinced that these new funds can provide truly differentiated risk exposure compared to daily-reset products, unless they target a select few specific hourly windows around earnings releases or other significant announcements.