PowerShares DB Crude Oil Double Long ETN (DXO) became the first apparent victim of the recent CFTC activity surrounding exchange traded products. Deutsche Bank (DB) announced today (9/1/09 press release) that it will redeem all outstanding shares of DXO after the market close on September 9.
Unlike many other ETF and ETN closures that result from the failure of the products to gain traction in the market, DXO has attracted more than $600 million in assets since its launch in June 2008. In fact, it may have become too successful.
Deutsche Bank did not directly mention the CFTC in its announcement but said this redemption is the result of “limitations imposed by the exchange” causing a “regulatory event” as defined in the terms of the Notes. Exchange-traded notes (ETNs) are different than typical ETFs, but that does not appear to be a root-cause of this closure. See our open letter to ETN sponsors and our article on ETN risk for additional information.
Daily share creations of DXO have been suspended, and it closed today at a 4.5% premium to its underlying value. Additional information can be found on the PowerShares ETN website, including the prospectus for the DXO Notes.
No other DB ETNs are affected at this time, including PowerShares DB Crude Oil Long ETN (OLO), PowerShares DB Crude Oil Short ETN (SZO), and PowerShares DB Crude Oil Double Short ETN (DTO). DTO was the best new exchange-traded product of 2008.
Disclosure: no positions