Earlier this month, the Securities and Exchange Commission (SEC) shocked observers of the exchange-traded funds (ETFs) industry when it approved the ForceShares Daily 4X US Market Futures Long Fund and the ForceShares Daily 4X US Market Futures Short Fund. If those funds come to market, they would be the first quadruple-leveraged ETFs available in the U.S. However, that may not happen, as it appears the SEC is having second thoughts about allowing quadruple-leveraged ETFs to see the light of day.

The SEC's "decision means the earlier approval – given by the SEC's staff, not the politically appointed commissioners – has been put on hold and doesn't allow the ForceShares Daily 4X US Market Futures Long Fund and Short Fund to begin trading," reports The Wall Street Journal, citing sources familiar with the matter. Proposed tickers for the ForceShares Daily 4X US Market Futures Long Fund and the ForceShares Daily 4X US Market Futures Short Fund are "UP" and "DOWN," respectively. (See also: Four Times the Fun (and Losses) With New Leveraged ETFs.)

"The primary investment objective of the Long Fund is to seek daily investment results, before fees and expenses, that correspond to approximately four times (400 percent) the daily performance of the closing settlement prices for lead month Standard & Poor's 500 Stock Price Index futures contracts,” according to an SEC filing. "ForceShares' application could have escaped the attention of commissioners before its approval because the SEC staff has the authority to make some decisions on its own. SEC commissioners can move to review those decisions, including the approval of new products," according to the Journal.

Currently, the leveraged ETF landscape in the U.S. consists of double- and triple-leveraged products and is dominated by two issuers: ProShares and Direxion. Leveraged ETFs represent a scant percentage of the $2.9 trillion in assets under management at U.S. ETFs, but some, such as the Direxion Daily Financial Bull 3X Shares (FAS) and the Direxion Daily Gold Miners Index Bull (NUGT), are heavily traded on a consistent basis. (See also: Top 4 Leveraged S&P 500 ETFs.)

Double- and triple-leveraged ETFs use derivatives instruments, resetting that exposure on a daily basis, to obtain leveraged results. The ForceShares ETFs, if the funds come to market, would use S&P 500 Index futures and e-mini futures to deliver the quadruple-leveraged effect. (See also: How to Day Trade Using Leveraged ETFs.)