Specialized financial exchange traded funds tracking capital-markets stocks were set to take a hit Monday from NYSE Euronext (NYSE: NYX) shares, which fell 10% after Nasdaq (NasdaqGS: NDAQ) and IntercontinentalExchange (NYSE: ICE) pulled their $11 billion bid for the exchange operator.
NYSE Euronext accounts for at least 5% of SPDR KBW Capital Markets ETF (NYSEArca: KCE) and iShares Dow Jones US Broker-Dealers (NYSEArca: IAI). It is also a roughly 5% holding in IQ Merger Arbitrage ETF (NYSEArca: MNA).
Morningstar analyst Timothy Strauts in a profile of SPDR KBW Capital Markets ETF notes the fund holds brokers, exchanges and other capital-markets facilitators.
“Would-be investors should note that the performance of these firms is highly dependent on (and correlated with) the health of the broader capital markets,” he writes. “In fact, over the past three years KCE has sported 89% correlation with the S&P 500 Index. All in all, this fund basically represents a leveraged play on the stock market.”
iShares Dow Jones US Broker-Dealers
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