In short: If the underlying asset isn't liquid, the ETF should be less so, and high yield junk isn't liquid.
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An ETF is, fundamentally, a derivative. A derivative trades differently than a security. Factored derivatives (2x ETFs, inverse 2x ETFs, etc) trade with a great deal more peril than non-factored derivatives. Beyond that, the rest of the article (as I read it - lots of jargon and alarmist phrasing) is basically an argument against the efficient markets hypothesis aimed at one of the purest tools the efficient markets hypothesis has ever come up with.
I mean, ETFs are algorithmically composed. What goes into them and how much is determined by software. The whole "the shit in the ETF is valued differently than the ETF" canard is an argument that the firms responsible for stewardship over the ETF cannot efficiently make markets.
I don't think that argument can be won or lost. We know derivatives blow up. We know leveraged derivatives blow up pyrotechnically. But if I understand ETFs correctly, this:
does not reflect the realities of ETFs.
If you are an "authorized participant" in the ETF, your buying and selling and arbitraging of the assets that make up that ETF aren't up to you. They're contractually controlled by the algorithms that make up the basket. You violate the terms of that contract, you run afoul of the SEC because ETFs are traded much differently than mutual funds because APs don't have the option to think twice about buying and selling. Step outta line and not only do you blow up that ETF, you blow up all the ETFs because all of a sudden, the market discovers that maybe they aren't actually algorithmic and everyone's investments are in peril to the whim of some chickenhearted trader they've never met. And unless your firm is only AP on that one ETF, it's in your best interests to take your lumps because fuckin'A, you're dead either way but if you don't fall on that grenade any assets you may have somewhere else are also fucked.