SSgA, PowerShares In Financial-Index Tangle

October 24, 2011


KRE Redemptions

KRE also happens to be one of the more heavily shorted ETFs in the market, and the index change almost certainly created additional challenges to short-sellers or to parties lending KRE shares to short-sellers.

When we last looked at short interest at the end of September, KRE had 2.5 times as many shares short than shares long, putting it on IndexUniverse’s “Very Very Short” list.

Creation and redemption activity on Friday tracked by IndexUniverse provided some clues as to how investors were preparing for the change. For example, on Oct. 21, the trading day before the index changes, investors yanked $58 million out of KRE—a sum that amounted to 11 percent of the fund’s outstanding shares.

At the same time, KBE, the $1.15 billion fund now called the SPDR S&P Bank ETF, had creations last Friday of almost $89 million, amounting to 8 percent of the portfolio.

It wasn’t immediately clear if those sizable creations had anything to do with the index change on the ETF.

The PowerShares Gambit

While it’s clear that PowerShares was seeking KBW’s expertise in the realm of finance-industry indexation, it’s not at all clear that it will have the same good fortune SSgA has had in attracting assets to the funds it hopes to roll out on Nov. 1.

Industry sources say it’s tickers people remember, and not indexes.

So, even though the five SSgA funds are not the same as they were last Friday, they still have the same tickers, which isn’t a trivial advantage in the increasingly competitive world of ETF marketing.

PowerShares said in a press release that the four PowerShares finance-related ETFs and their indexes are:

  • PowerShares KBW Bank Portfolio (NYSEArca: KBWB), which is based on the KBW Bank Index
  • PowerShares Regional Banking Portfolio (NYSEArca: KBWC), which is based on the KBW Regional Banking Index
  • PowerShares Capital Markets Portfolio (NYSEArca: KBWC, which is based on the KBW Capital Markets Index
  • PowerShares Insurance Portfolio (NYSEArca: KBWI), which is based on the KBW Insurance Portfolio Index


Tellingly, PowerShares said in its press release that the funds’ old tickers were the tickers that SSgA used when its ETF were based on the KBW indexes.

It’s worth repeating that SSgA is still using those same tickers in the reconstituted SPDR funds that are now based on S&P indexes.

First There Was The ‘Ticker Tangle’

Interestingly, this isn’t the first time SSgA and PowerShares have mixed it up over the marketing of their ETFs.

SPDR, the trademark holder of SSgA tickers, sued PowerShares in July 2010 for too closely copying SSgA tickers on a lineup of nine small-cap sector funds PowerShares had launched.

For example, the PowerShares S&P SmallCap Financials ETF (NasdaqGM: PSCF) was originally trading under the ticker “XLFS”—bearing more than a passing resemblance to “XLF,” the ticker of SSgA’s nearly $5 billion Financial Select Sector SPDR Fund (NYSEArca: XLF).

The ticker tangle was settled out of court with PowerShares changing the tickers on the nine funds. Financial terms of the settlement, if any, weren’t disclosed.


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