What Just Happened? Barclays Stabs Investors VXX, OIL ETN - Plus WEAT Exchange Traded Fund ETF News

LONDON/NEW YORK, March 14 (Reuters) - British bank Barclays (BARC.L) said on Monday it had suspended the sales and issuance of two exchange-traded notes (ETNs) with combined assets of about $1 billion - one linked to crude oil and another to a gauge of market volatility - due to capacity constraints, in a move that some investors said could spur big price swings in the products.

ETNs are debt securities that banks issue with the promise to pay holders a return linked to the performance of underlying securities or benchmarks. Investors are particularly sensitive about the product ever since another volatility-tracking ETN called XIV went bust in a matter of days in February 2018, dealing nearly $2 billion in losses to shareholders.

Barclays announced today that it has indefinitely suspended any further sales from inventory and any further issuances of the iPath Pure Beta Crude Oil ETNs (OIL) due April 18, 2041, and the iPath Series B S&P 500 VIX Short-Term Futures ETNs (VXX) due January 23, 2048, in each case effective as of the open of trading on March 14.

Barclays said in a statement that this suspension is being imposed “because Barclays does not currently have sufficient issuance capacity to support further sales from inventory and any further issuances of the ETNs. These actions are not the result of the crisis in Ukraine or any issue with the market dynamics in the underlying index components.”

“The ‘Issuance Capacity’ thing is a bit of a get out of jail free card, so we can interpret that as ‘we no longer feel comfortable managing the implied risk of this product,’” said Dave Nadig, CIO and director of research at ETF Trends and ETF Database.

“Remember, an ETN doesn’t ‘own’ anything — it’s just a promise to pay a pattern of returns from a bank,” Nadig continued. “In this case, with, say VXX, Barclays owes the ETN holders the pattern of returns of a daily-rebalancing front-second month VIX futures portfolio. It’s not complicated to run, but that doesn’t mean it’s riskless.”

With the markets moving as quickly as they have been — particularly volatility and oil — Nadig suspects a risk manager simply made the call that they no longer wanted to have someone trying to offset these promised returns by owning a lot of VIX and oil futures on the bank’s books.

Teucrium Commodity Trust - Teucrium Wheat Fund is an exchange traded fund launched and managed by Teucrium Trading, LLC. The fund invests in the commodity markets. It uses derivatives such as futures contracts to invest in wheat. The fund employs a market neutral investment strategy. It seeks to track the daily weighted average of the closing settlement prices for three futures contracts namely 35% second-to-expire CBOT Wheat Futures Contract, 30% third-to-expire CBOT Wheat Futures Contract, and 35% CBOT Wheat Futures Contract expiring in December following the expiration month of the third-to-expire contract. Teucrium Commodity Trust - Teucrium Wheat Fund was formed on September 19, 2011 and is domiciled in the United States.
The investment seeks for changes in the Shares’ NAV to reflect the daily changes of the price of wheat for future delivery, as measured by the Teucrium Wheat Index. The fund seeks to achieve its investment objective by investing in Benchmark Component Futures Contracts. Under normal market conditions, the manager expects that 100% of the fund’s assets will be invested in benchmark component futures contracts and in cash and cash equivalents. Benchmark: Teucrium Wheat USD

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