[Expanded with quotes from Michael Sapir, CEO of ProShares.]

Trading has reopened on the ProShares Short Financials (AMEX: SEF) and ProShares UltraShort Financials (AMEX: SKF) ETFs, after being halted this morning as part of the fallout from the SEC's ban on short-selling in Financial stocks.

See our earlier story on the topic here.

The two ETFs are not functioning normally, however: ProShares has banned "creations" until further notice, meaning that no new shares can be created to fill demand. Shares can, however, be redeemed as usual by Authorized Participants.  

What does this mean for the average investor?

It depends. Importantly, investors can still buy and sell the shares of both funds; in fact, more than 10 million shares of SKF have traded today, with high liquidity and tight spreads.

However, ProShares has warned in a statement that "these ProShares ... may trade at prices that are not in line with their intraday indicative values."

In other words, the share price may not match the expected returns. SKF seeks to deliver -200% of the daily movement of the Dow Jones Financial Index, while SEF aims to deliver -100% of the index's daily returns.

At midday, SKF was trading more or less in line with expectations. The fast-moving nature of the markets made it difficult to say exactly how close it was to its underlying indicative value at any moment, but generally, it was in the vicinity. Three different checks of real-time prices over a 1-minute period showed SKF trading in line with expectations once and at a premium of about 1% over expectations twice.

The possibility of a premium is what investors should keep an eye on. The last time an exchange-traded product suspended creations was in 2007, when Barclays halted creations on the iPath India exchange-traded note (NYSEArca: INP). That occurred after India clamped down on foreign investment in the country. At the time, INP soared to a significant premium over its net asset value, and stayed there for many months as demand for the shares exceeded supply. INP was then one of the few ways U.S. investors could gain access to the rising Indian equity market.

A similar situation could develop with SKF if sentiment on the Financial sector turns negative. SKF is likely the "go-to" product for traders looking for short exposure to that market, as they can no longer short individual Financial stocks and the competing ETF from Rydex (NYSEArca: RFN) is less well known and currently has little volume. If investors were to turn to SKF on a large-scale level, the risk of a premium would rise.

When asked how long the ban on creations would last, Michael Sapir, CEO of ProShares, said, "I think everyone acknowledges that the SEC order [banning short-selling on Financials] is a temporary situation. I think it's commonly held among the regulators that being able to get short exposure is a good thing for the economic system. So we believe this [suspension] is temporary."

When asked if that meant the suspension would stay in place until the SEC ban expires, Sapir replied:

"We're looking into our options. In light of the SEC's really unprecedented action, we determined it was unlikely to get short exposure to cover new shares today, so we decided not to issue new shares. But investors can buy and sell shares on the exchanges. SKF—the very liquid double inverse ETF—has traded 10 million shares with tight spreads. People who want to sell their positions or buy new positions can do so."