Today is the last day for two Credit Suisse ETNs to trade on the NYSE Arca exchange. The VelocityShares 3x Long Crude Oil ETN (UWTI) and the VelocityShares 3x Inverse Crude Oil ETN (DWTI) will delist after the close of trading today, but will continue to trade over-the-counter.
Nonetheless, as of this morning, there was still more than $800 million invested in the pair of products, meaning that depending on who exits the ETNs today and how they trade over-the-counter, the better part of $1 billion could be trapped in the products for the foreseeable future.
Given the fact that they are very profitable products for their issuer, ETF experts have speculated that Credit Suisse is in the process of cleaning up its balance sheet by removing liabilities.
Despite the popularity of DWTI and UWTI, delisting and the discontinuation of issuances essentially equate to a death sentence. At the very least, the move virtually guarantees that large premiums or discounts to NAV will open up and that illiquidity problems will manifest for what have until now been highly liquid and well-traded products.
Investors should exit the products, and contact a registered investment advisor if they are unsure about how to close out their positions in the ETNs.
Replacements In The Works
At least two firms have stepped up to fill the void the delistings will leave. ProShares has filed for the ProShares UltraPro Bloomberg Crude Oil and ProShares UltraPro Short Bloomberg Crude Oil ETFs, which will offer 300% and -300% exposure, respectively, to the Bloomberg Crude Oil Index.
Similarly, United States Commodity Funds, the issuer of the United States Oil ETF (USO), has filed to launch the United States 3x Oil Fund and the United States 3x Short Oil Fund. The two funds will be tied to the performance of futures contracts on light, sweet crude oil.
The recent filings are for exchange-traded funds rather than ETNs.
Contact Heather Bell at [email protected]