VelocityShares Credit Suisse 3X Long Crude ETN (UWTIF)

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Fidelity, Interactive Brokers Block Buying of Oil ETNs as Deslisting Looms

Different tacks from brokersage in alerting retail clients about risks

By Chris Dieterich and Asjylyn Loder •
Dec 8, 2016 3:43 pm ET

Photo: Bloomberg News

Online brokerages are taking different tacks in alerting mom-and-pop traders about the imminent delisting of two popular oil-tracking exchange-traded products.

Some went as far as blocking investors from buying new shares.

The VelocityShares 3x Long Crude Oil ETN and the VelocityShares 3x Inverse Crude Oil ETN will be delisted from the NYSE Arca exchange at the close of trading Thursday and pushed into the over-the-counter market, a so-called gray market where regular investors find it difficult and costly to transact. Credit Suisse Group AG, the issuer of the exchange-trade notes, announced the delisting in a news release last month, though nearly $1 billion remained in outstanding notes at the close of trading on Wednesday, according to data from XTF.

ENLARGE

Ahead of the risky situation, Fidelity Investments blocked investors from initiating new buy orders in both ETNs late last week, a spokesman said. Investors remain able to sell the notes. Owners of both products received notifications via the brokerage’s online message center that the products will be dropping into the over-the-counter market. Fidelity also eliminated the ability of clients to trade the notes with borrowed money.

Clients of Interactive Brokers Group received a delisting notice and were barred from opening new positions, according to a copy of the message sent to clients. Interactive Brokers also warned clients that customers with short positions could face a “forced close-out” should Credit Suisse recall its outstanding notes.

Other brokerages took action to alert clients but did not block them from buying new shares.

Vanguard Group notified clients about the delisting but left it up to investors whether to buy or sell, a spokesman said. Clients of Charles Schwab said they were able to still able to buy new shares of the product on Thursday afternoon but received a message while buying: “Be advised: This security will cease trading on any national securities exchange after December 8, 2016.” A spokeswoman for Schwab did not immediately return a call for comment.

Mobile-device oriented brokerage Robinhood sent a notification on Nov. 30 that one of the ETNs “may still exist in your account, but you will no longer be able to purchase” shares, according to the alert.

http://blogs.wsj.com/moneybeat/2016/12/08/fidelity-interactive-brokers-block-buying-of-oil-etns-as-deslisting-looms/?mod=yahoo_hs