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Schwab Mulls ETF Warnings: Report

tlydon@globaltrend.com (Tom Lydon)

Charles Schwab Corp. is considering a warning for clients before they trade certain exchange traded products, according to a Reuters report.

Exchange traded funds and notes have suffered a reputational black eye following the sharp decline in shares of VelocityShares Daily 2x VIX Short-Term ETN (NYSEArca: TVIX). [SEC Reviewing TVIX Dive]

“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,” Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, told Reuters.

The warning would be similar to the one investors receive before they trade options linked to volatility, which are more complex than equities, according to the report.

The note will serve as “a last warning to say, ‘Hey, make sure you know what you are doing. If not, call us and we will explain to you,’” Frederick said.