Trade In PKW Resumed, Index Issue Cited

November 08, 2011

NYSE resumes trade in PowerShares’ ‘Buyback Achievers’ ETF.

(Updated with background on index and ETF pricing throughout.)

Trading in the PowerShares Buyback Achievers Portfolio (NYSEArca: PKW) was resumed late Tuesday morning after Arca, the New York Stock Exchange’s electronic trading platform, halted it for news pending at the open due to issues with its index’s value.

The Big Board said in a press release the ETF was halted because the value of the fund’s underlying index wasn’t being disseminated as frequently as required -- every 15 seconds, under U.S. securities regulations. An official at PowerShares confirmed that the problem had been rectified and that the ETF was again trading.

The Big Board said trade resumed at 11:20 a.m. Eastern Standard Time.

Trading halts related to index valuation issues, such as the one today in PKW, do occur from to time, a New York Stock Exchange official told IndexUniverse in a telephone interview. Nothing about the PKW halt related to the Share BuyBack Achievers Index’s valuation was outside of the norm, the official said.

It wasn’t immediately clear what specific problem the index was having, though the NYSE official said the problem first began rearing its head on Monday afternoon. The exchange halted trade in PKW once it determined that the problem had not been rectified as of the open on Tuesday.

Valuation Every 15 Seconds

The value of indexes, as well as the intraday net asset values (I-NAVs) of ETFs, must be disseminated every 15 seconds under U.S. securities regulations. While the two values could in theory be identical, they are different a good deal of the time in part because many ETFs sample their indexes as opposed to replicate them perfectly.

Moreover, many ETFs that replicate their indexes, such as the SPDR S&P 500 ETF (NYSEArca: SPY), have different values than their underlying indexes.

SPY, for example, was trading on Tuesday afternoon at $126.32 a share, while the actual index was at 1.260.85 -- somewhere around 10 times the value of the ETF. The similar variable is the percentage movement of the two.

The ETF, which had almost $60 million in assets as of Nov. 7, is full of U.S. companies that have repurchased at least 5 percent of their outstanding shares in the trailing 12 months.

PKW has an net annual expense ratio of 0.70 percent, according to information PowerShares posted on its website. The fund is rebalanced quarterly and reconstituted annually.

 

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