An oil-focused exchange traded note (ETN) has decided to temporarily stop issuing new shares, possibly in anticipation of new regulations from the Commodity Futures Trading Commission (CFTC).
Deutsche Bank has announced a temporary suspension of PowerShares DB Crude Oil Double Long ETN (DXO). According to the press release issued, this suspension may cause fluctuations in the trading value of the notes.
DXO is designed to provide investors with two times the monthly performance of an oil-based commodity index.
No explanation was given as to the reason behind the decision, but Joshua Schneyer for Reuters reports, “…it could be tied to recent moves by the U.S. Commodities Futures Trading Commission (CFTC) to clamp down on leveraged or speculative trading in some commodities, including energy contracts.”
Deutsche Bank believes the limitations on issuance may cause an imbalance for the supply and demand of the notes, and may cause the ETNs exisiting to trade at a premium or discount in relation to its indicative value.
DXO finished Aug. 18 up 5.6%, trading at a 1.50% premium to its Indicative Intra-day Value. DXO also had its highest trading volume in more than a month at 15.68 million shares.
United States Natural Gas (UNG) has also stopped issuing new shares in anticipation of CFTC regulations despite being approved for 1 billion more. Yesterday, it traded near a record premium to its net asset value (NAV).
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