Further developments have unfolded since Barclays abruptly suspended sales and issuances of two popular exchange-traded notes earlier this month.
The British bank said on March 28 that it was facing an estimate Loss of $592 million and regulatory control for exceeding a US limit on sales of structured products; Barclays had offered $15.2 billion in additional tickets which he had only recorded in about a year.
“This is another example of the difference between an ETN and an ETF,” said Todd Rosenbluth, head of research at ETF Trends and ETF Database. “Investors and advisors should be aware of the unique risks to product structures.”
Barclays said on March 14 that it had indefinitely suspended all new sales of its stocks and all new issuance of the ETN iPath Pure Beta Crude Oil (OIL) due April 18, 2041, and iPath Series B S&P 500 VIX (VXX) Short Term ETN due on January 23, 2048, in each case from the opening of the markets.
Barclays said in the March 14 statement that the suspension was imposed “because Barclays does not currently have sufficient issuance capacity to support further sales from stocks and any further issuance of ETNs. These shares are not the result of the crisis in Ukraine or a problem with market dynamics in the constituents of the underlying index.
“Remember, an ETN doesn’t ‘own’ anything – it’s just a promise to pay for a pattern of returns from a bank,” said Dave Nadig, CIO and Director of Research at ETF Trends and ETF Database. .
Barclays said in the March 14 statement that it plans to reopen ETN sales and issuance as soon as it can accommodate additional capacity for future issuance.
“It’s similar to what Credit Suisse has done many times,” Nadig said, referring to the soft closing of the TVIX company a handful of times before finally closing the doors to investors, forcing TVIX to trade at massive premiums before shedding investors when the company changed its mind, sending the price back to earth. “It’s remarkable in this case because VXX in particular is so big.”
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