REX Shares, LLC (REX) has expanded their relationship with Bank of Montreal with the addition of the Dorsey Wright MLP Index Exchange Traded Notes (the ETNs) to their product offerings. The ETNs are linked to the DWA MLP Select™ Index (the Index) and issued by Bank of Montreal.
This product further compliments the REX brand, which launched MicroSectors ETNs in January 2018 with FANG+ linked ETNs, and expanded to include U.S. Big Banks and U.S. Big Oil linked ETNs in 2019. The Dorsey Wright MLP Index ETNs are trading on Nasdaq under the symbol BMLP.
The DWA MLP Select™ Index is composed of publicly traded master limited partnerships (MLPs) that are selected based on the Dorsey Wright Relative Strength Ranking Methodology. Relative strength measures how one security is performing in relation to another in an effort to identify which security is outperforming the other. On a monthly basis, the Index rebalances the equally-weighted basket by selecting the 15 MLPs exhibiting the largest positive relative strength characteristics.
REX, a provider of alternative investment products, sees demand for MLP exchange traded products. “We are excited to begin marketing BMLP. We believe in the Dorsey Wright index methodology for the MLP space and feel the ETN vehicle for MLP’s index investing is the preferred route for investors to avoid K-1 forms” said Scott Acheychek, President of REX. “Since the ETNs were launched on December 19, 2016, the Dorsey Wright Index has outperformed the popular benchmark Alerian MLP indices. We are thrilled to add this to our lineup.”
Exchange-traded products (ETPs) structured as a partnership are unincorporated business entities so they are not subject to the double taxation of a corporation. If the partnership does not elect to be taxed as a corporation, then it also benefits from pass-through taxation so any realized gains and losses flow directly to investors in the fund.
Partnerships are flexible in terms of the types of investments they can make. Unlike grantor trusts, partnerships can invest in other types of commodities like oil or natural gas due to their flexibility.
However, ETPs structured as a partnership fall under the regulatory measures of the U.S. Commodity Futures Trading Commission. As such, these ETPs are subject to reporting and other financial disclosures.
One specific type of partnership is the master limited partnership (MLP).
MLPs are typically classified into three categories:
- Upstream MLPs: involved in the exploration, recovery, development and production of crude oil and natural gas.
- Midstream MLPs: involved in the gathering, processing, storage and transportation of oil and gas.
- Downstream MLPs: involved in the distribution of fuels to end customers such as residential, industrial and agricultural entities.
MLP ETPs, in particular, are gaining traction as their own niche market in the energy sector.
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