Leveraged Exchange Traded Commodities (ETCs) from ETF Securities have been withdrawn from sale by The Share Centre, What Investment has learnt.

The online share dealing service decided to withdraw them from sale because of fears that some clients may have misunderstood what it is they are buying due to the complex nature of the products.

Speaking exclusively to What Investment, Nick Raynor, investment adviser at The Share Centre, said that there was a risk that clients would see the recent positive returns and ignore the gearing of these products.

He explained, ‘We stopped doing the leveraged products about two months ago because of their complexity. We have written to ETF Securities and said we will no longer allow our clients to buy them.

‘The client is taking the risk and they need to know what they are doing. There were some ETCs where people might have looked at it and thought it is an easy way to make money.'

However, ETF Securities stressed that the benefits of leveraged ETCs and exchange traded funds (ETFs) outweigh the drawbacks.

Scott Thompson, co head of European Sales at ETF Securities said that investors in a 2 x leveraged ETF can only lose up to 100 per cent of their initial investment and yet receive 200 per cent of the upside.

He explained that investors can potentially lose considerably more with futures and options because of the higher levels of gearing and no cap on losses.

He added, ‘Leveraged products do expose investors to greater gains or losses but leveraged ETFs will cap any loss.’

Thompson said that leveraged long and short ETFs provide investors with a different tool through which to invest and, while they provide leverage in a similar way to derivatives, the fact that losses are capped, makes them far more like a single high beta stock.

He added, ‘They will not be suitable for every investor, but once understood, it becomes clear that leveraged and short ETFs offer a powerful product for taking short term views on the market.’