Credit Suisse ETNs Now Trading OTC
Three exchange traded notes (ETNs) from Credit Suisse were delisted from the New York Stock Exchange last Friday (April 3, 2009) and began trading over-the-counter rather than on a securities exchange.
Back on March 10, Credit Suisse (CS) announced its intent to delist, but not close, three of its ETNs that are marketed under the Elements brand. No new shares are being created, and without this arbitrage mechanism the market price no longer tracks the actual value of the shares.
The affected securities are:
- Elements MLCX Gold Index ETN (ticker = CDSUI, former ticker = GOE)
- Elements MLCX Livestock Index ETN (ticker = CDSUH, former ticker = LSO)
- Elements MLCX Precious Metals Index ETN (ticker = CDSUJ, former ticker = PMY)
The background story on these ETNs is quite interesting. Recent trading in Elements MLCX Gold Index ETN was strange enough to draw the attention of the NYSE. Additionally, I issued a “Sell” on the ETN formerly known as GOE on March 9 at a price of $114.90 while the indicative value (NAV) was just $10.90. It was trading at a 1,000% premium. At that time Credit Suisse informed me they were not planning to issue any more shares and that the market maker was out of inventory.
The trading price of Elements MLCX Gold Index ETN subsequently dropped significantly, but it is still trading at an unjustifiable premium. In Friday’s OTC trading action, it had a low of $10.00, a high of $40.00, and a closing price of $26.00 as 6,320 shares traded hands. The shares had a 300% range while the indicative value remained below $10 per share. The Elements website indicates an indicative value of $9.80 as of April 2, 2009.
The Elements MLCX Precious Metals Index ETN (CDSUJ) traded 7,600 shares on Friday with a price range of $5.50 to $7.50. Elements MLCX Livestock Index ETN (CDSUH) did not have any trades. If you did not heed earlier warnings to get out of these products, then I suggest you try to sell with a limit order at a price you are willing to accept. Be prepared to wait for a day, and maybe several days, to get your order filled. The OTC market is not nearly as efficient as the NYSE.
Disclosure: no positions