There’s obviously high demand for these products, and neither the limits nor closures of funds (as in the case of the PowerShares DB Double Long Crude Oil (DXO) exchange traded note (ETN)) will erase the demand. What we could very well see is some funds closing, then reopening in a smaller form with higher expense ratios. These products are so popular that investors may be willing to pay more to own them.
Meanwhile, Deutsche Bank has been quiet about its exact reason for closing DXO. Some reports, says Matt Hougan for Index Universe, have noted that DXO might have been concerned about the size of its positions and any upcoming CFTC limits. But Hougan notes that perhaps the New York Mercantile Exchange might have exercised a “discretionary power” that it has rarely used.
There’s no federal position limit, but the NYMEX actually has two levels of such limits for the majority of commodities, and that includes oil. Firms are limited to 3,000 contracts.
For more information on commodities, visit our commodity category.
Max Chen contributed to this article.