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Two Popular Leveraged Oil ETFs Are Shutting Down Next Month

Wednesday, November 16, 2016 15:49
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Traders looking to place high-stakes bets on oil prices will have two less tools are their disposal next month, when two popular VelocityShares ETNs are delisted.

The VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSE:UWTI), which provides triple leveraged bullish exposure to oil futures, and the VelocityShares 3X Inverse Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSE:DWTI), which offers triple leveraged bearish (inverse) exposure, will both cease operations in December. From Credit Suisse:

As part of its continuing effort to monitor and manage its suite of exchange traded notes, Credit Suisse AG has decided to delist the foregoing ETNs with a view to better aligning its product suite with its broader strategic growth plans.

The ETNs will survive in some form after they’re delisted, but they’ll no longer be available on any exchange:

Accordingly, Credit Suisse AG anticipates that the ETNs will continue to trade on NYSE Arca up to and including December 8, 2016 and that effective December 9, 2016, the ETNs will no longer be listed for trading on any national securities exchange. In addition, Credit Suisse AG will suspend further issuances of these ETNs effective December 9, 2016. Following their delisting, the ETNs will remain outstanding, though they will no longer trade on any national securities exchange.

Both UWTI and DWTI have proven popular with traders over the years, gathering over $1 billion and $350 million in assets, respectively. They’re also heavily traded, with about 18 million and 3 million shares changing hands each day, respectively.

Their popularity has come despite rapid share price declines. Contango in the futures markets often leads to steep losses for leveraged products, with the ETPs forced to engage in repeated reverse splits to keep their prices afloat.

Leveraged ETFs had come under fire from regulators earlier this year because of these concerns, so perhaps today’s move represents Credit Suisse getting ahead of some potential government intervention down the line.

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