Targeted Banking ETNs Debut

Today REX Shares rolled out another cluster of MicroSectors ETNs several months after the launch of the first group, which focused on FAANG-type stocks. This round of products includes five ETNs focused on U.S. big banks. The family is as follows:

• MicroSectors U.S. Big Banks Index 3x Leveraged ETN (BNKU)
• MicroSectors U.S. Big Banks Index -3x Inverse Leveraged ETN (BNKD)
• MicroSectors U.S. Big Banks Index 2x Leveraged ETN (BNKO)
• MicroSectors U.S. Big Banks Index -2x Inverse Leveraged ETN (BNKZ)
• MicroSectors U.S. Big Banks Index Inverse ETN (KNAB)

The ETNs each come with an expense ratio of 0.95% and list on the NYSE Arca. Like the previous group of MicroSectors ETNs, the “big bank” family of ETNs represents senior, unsecured obligations backed by the Bank of Montreal.

Underlying Index

The MicroSectors ETNs offer 1x to 3x leveraged and inverse exposure to an index of just 10 extremely liquid equal-weighted equities. In the case of the big banks family of MicroSectors ETNs, the underlying for the group, the Solactive MicroSectors U.S. Big Banks Index, includes the following 10 stocks:

• Bank Of America
• BB&T
• Citigroup
• Goldman Sachs Group
• JPMorgan Chase
• Morgan Stanley
• PNC Financial Services Group
• Charles Schwab
• US Bancorp
• Wells Fargo

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

“We created the MicroSectors concept in order to address a gap in the marketplace for sector-specific trading products,” said REX Shares founder and CEO Greg King in a press release.

The ETN structure is necessary because with only 10 securities in the underlying index, the MicroSectors do not meet the diversification requirements for regular ETFs, which are required to have at least 20 securities.

But that’s really the point: The MicroSectors are designed as highly targeted trading tools that offer exposure to very specific themes via the largest and most liquid companies in the space.

The concentrated portfolio combined with the leveraged and inverse exposure allows investors to express their strong opinions about a particular investment area in ways other than the traditional long-only exposure.

Contact Heather Bell at [email protected]