Oct 15 (Reuters) - Volatility Shares, an issuer of

exchange-traded funds, filed on Wednesday to launch a total of

27 highly leveraged ETFs, including the first-ever proposed 5x

ETF for the U.S. market, at a time of rising caution over

inflated asset prices as markets continue their upward swing.

A 5x target means that an ETF would seek to quintuple the

daily return of an underlying single stock.

The single stocks involved include tech heavyweights Tesla

, Nvidia ( NVDA ), AMD, Amazon ( AMZN ) and

Palantir ( PLTR ), representing some of the greatest

beneficiaries of the AI-spending fueled market rallies.

The list also includes Coinbase and crypto treasury

pioneer Strategy, two key players from a sector that

has produced stellar wins for the IPO market this year.

Volatility Shares has filed for a 3x and a 5x offering on

Strategy, where existing issuers have struggled to manage a 2x

product. Until now, the U.S. Securities and Exchange Commission

has approved single-stock leveraged ETFs with a maximum of 2x.

"You have to designate a reference benchmark and use that to

calculate 'value at risk,' or the chance that the product will

be unduly risky for either investors or the market," said Rahul

Sharma, president of financial data provider Indxx, referring to

the SEC's rules about launching such products.

Sharma noted that recently the SEC changed guidance on what

assets could be used as a reference benchmark to make it easier

to win approval, and that the pace of new leveraged ETF filings

has been growing.

According to StockTwits, there are now some 900 leveraged

products, accounting for 33% of all new ETFs but only 1% of the

U.S. ETF industry's $12 trillion in assets.

However, firms have "enormous latitude in defining these

calculations," said ETF.com President David Nadig.

Volatility Shares declined to comment on its plans to

calculate "value at risk."

According to Nadig, a partisan gridlock in Washington has

also provided some cover for the filing and potential launching

of these ETFs.

"If the SEC came back and sat at their desks, they'd put the

kibosh on this. In the normal course of business you'd expect

these to be shot down quickly," Nadig added.

A Reuters analysis of SEC filings found that Volatility has

proposed its filings to go effective 75 days after submitting.

Such time-based flipping of filing status has previously been

used by companies looking to IPO during a shutdown as well.

According to Indxx's Sharma, the former rules "prevented the

launch of some of the highest volatility products," while the

new guidance "introduces more systemic risk."

Concerns are piling on that a correction is on the horizon,

and products designed to amplify upside could end up achieving

the same for a crash.

The crypto market experienced the largest liquidations in

history, with more than $19 billion wiped out across leveraged

positions late on Friday after U.S. President Donald Trump

escalated his trade rhetoric against China.

Tech stocks are also not insulated from such shocks and a

highly leveraged market positions can amplify the selloff, as

seen on Friday, when some leveraged investors were forced to

close their positions after their collateral fell below certain

thresholds.

A report from JPMorgan ( JPM ) estimated that some $26

billion of selling from leveraged ETFs at Friday's close drove

the overall market even lower.

"These products are a terrible way to get this kind of

leverage," Nadig said.