Nasdaq will cancel trades in some exchange traded funds (ETFs) launched yesterday by Scottrade subsidiary FocusShares that saw their share prices plunge, Reuters reported Thursday.
Carrie Hibbs, a spokeswoman for FocusShares, in a telephone interview Thursday said the exchange was working to bust erroneous trades. She said ETF shareholders will not see the value of their shares impacted.
ETFs were put in a negative spotlight in the confusion of the May 2010 flash crash when many funds plunged in value and later had trades cancelled.
FocusShares on Wednesday introduced 15 ETFs based on Morningstar indexes.
Some FocusShares ETFs saw their share prices drop 98% with those cancelled trades occurring in the first half-hour of trading Thursday, Reuters reported.
FocusShares closed some products a few years ago, and their return to the market is somewhat of a surprise, as Scottrade is a privately held company. Word of the deal percolated through the ETF industry rumor mill, as did talk that the new ETFs would be available commission free to Scottrade clients, says Oliver Ludwig for Index Universe. [Scottrade Tries To Undercut Its ETF Competitors.]
Fees on the funds will range from five basis points on its large-cap fund to 19 basis points on other sector-based ETFs, for those trading outside the brokerage firm. The new FocusShares ETFs are competing directly with similar low-priced products sponsored by Charles Schwab, Vanguard and StateStreet and are undercutting the competitors by at least one basis point. However, Scottrade clients will be able to trade these ETFs online, for free with their brokerage accounts. [The ETF List Keeps Growing.]
Scottrade follows Schwab in launching its own ETFs. The online brokers are hoping they can use their client base to drive trading activity to their own ETFs.
So far, there are not any bond or international equity ETFs offered, but you can bet they are in the drawing board, says Murray Coleman for Barrons. A list of the new ETFs can be viewed here.
Tisha Guerrero and John Spence contributed to this article.