Daily ETF Watch: Creates Halted On 11 ETFs

ProShares temporarily halts creations on a number of futures-based ETFs.

ProShare Capital Management has temporarily suspended creation of new shares in 11 futures-based ETFs because of a delay in filing regulatory paperwork that the firm hopes to resolve this week.

“The temporary suspension is due to a regulatory filing requirement that we expect will be resolved in the next few business days,” a statement issued on Friday by the Bethesda, Md.-based company said.

The affected funds include the:

• ProShares Ultra DJ-UBS Commodity (UCD)
• ProShares UltraShort DJ-UBS Commodity (CMD)
• ProShares Ultra DJ-UBS Natural Gas (BOIL)
• ProShares UltraShort DJ-UBS Natural Gas (KOLD)
• ProShares Ultra Australian Dollar (GDAY)
• ProShares UltraShort Australian Dollar (CROC)
• ProShares Ultra Euro (ULE)
• ProShares Short Euro (EUFX)
• ProShares Ultra Yen (YCL)
• ProShares Short VIX Short-Term Futures ETF (SVXY)
• ProShares VIX Mid-Term Futures ETF (VIXM | B-38)

During the suspension, there may be increases in the spread between bids and offers that so-called authorized participants (APs)—who create ETF shares for fund sponsors—are willing to accept and pay, the firm said in a press release.

In addition, there could be a significant variation between the market price at which shares are traded and the shares’ net asset value, which is also the price at which shares can be redeemed by APs in creation units, ProShares said.

The potential impact of either wider bid/ask spreads, or the reduced number of shares on which quotes may be available, could increase trading costs to investors, the firm said.

Filing

First Trust put into registration a multimanager, multistrategy actively managed ETF dubbed the First Trust Strategic Income ETF, which will invest in a gamut of high-yield securities and dividend-paying equity securities at a time when investors continue to scour the investment universe for yields.

The dividend growth aspect is in the context of persistent low interest rates, highlighted by the Federal Reserve’s ongoing bond-buying stimulus plan called quantitative easing. Low bond yields have resulted in investors using dividend-paying equities as a yield-replacement strategy.

The fund will have exposure to high-yield corporate bonds, first-lien senior secured floating-rate bank loans, mortgage-related investments, preferred securities, international sovereign bonds, equity securities of energy infrastructure companies and dividend-paying domestic equity securities and depositary receipts, according to its regulatory filing.

First Trust expects that the fund may invest up to half of its net assets in other ETFs, but doesn’t expect to operate the fund principally as a “funds of funds.” Subadvisors to the fund include Energy

Income Partners, Stonebridge Advisors and Richard Bernstein Advisors.

Associated fees and tickers for the fund were not made available in the filing.