Daily ETF Watch: Volatility Funds Debut

May 03, 2016

Greg King’s new firm REX Shares launched two volatility-focused funds this morning. The funds will list on Bats, the Lenexa, Kansas-based exchange operator that owns ETF.com. The REX VolMAXX Long VIX Weekly Futures Strategy ETF (VMAX) and the REX VolMAXX Inverse VIX Weekly Futures Strategy ETF (VMIN) are both actively managed funds that invest primarily in near-month VIX futures.

The CBOE Volatility Index (VIX) measures the price of near-term S&P 500 options and, as a result, the implied volatility of the S&P 500.

VMAX will use a Cayman Islands subsidiary to invest 25% of its assets in VIX futures contracts—mostly near term, but also longer-dated ones as well—and potentially other vehicles from options and swaps to commodity futures and fixed-income securities. The fund comes with an expense ratio of 1.25%.

However, the fund can also invest in VIX futures contracts apart from its subsidiary, as long as it complies with federal security laws and limits on such investments. It also can invest in such vehicle swaps that offer exposure to VIX futures, exchange-traded products that are tied to VIX futures and fixed-income securities like cash equivalents.

VMIN charges 1.45%. Like VMAX, it incorporates a Cayman Islands subsidiary. However, where VMAX involves primarily long positions, VMIN takes short positions.

REX Shares was founded by King, who previously was responsible for ETNs at Barclays and Credit Suisse. He also co-founded VelocityShares. King is putting to use his knowledge of and vast experience in the alternatives space with his new firm.

Funds Switch Bond Indexes

Yesterday, six Direxion ETFs changed their indexes, swapping out NYSE benchmarks for ones provided by the Intercontinental Exchange. Similarly, BlackRock’s iShares unit said recently it would swap out the Barclays indexes on three of its bond ETFs for ICE indexes.

The Direxion Daily 7-10 Year Treasury Bull 3x Shares (TYD), the Direxion Daily 7-10 Year Treasury Bear 3x Shares (TYO) and the Direxion Daily 7-10 Year Treasury Bear Shares (TYNS) have changed their benchmark from the NYSE 7-10 Year Treasury Bond Index to the ICE U.S. Treasury 7-10 Year Bond Index.

The Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF), the Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV) and the Direxion Daily 20+ Year Treasury Bear 1X Shares (TYBS) have changed their benchmark from the NYSE 20 Year Plus Treasury Bond Index to the ICE U.S. Treasury 20+ Year Bond Index.

At iShares, three funds will adopt new ICE indexes as of July 1:

Contact Heather Bell at [email protected].

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