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KRX warns retail investors for investment binge on leveraged WTI futures ETN

(AFP-Yonhap)
(AFP-Yonhap)

The Korea Exchange (KRX) on Wednesday warned investors about the possibility of total losses of their investments in leveraged West Texas Intermediate crude oil futures exchange-traded notes.

The nation’s market operator will suspend trading for local ETN products with an excessive disparate ratio of over 30 percent -- Shinhan Leverage WTI Futures ETN(H) and MiraeAsset Leveraged Crude Oil Futures ETN(H) 9 -- on Thursday and Friday.

It has planned to resume single-valent trading for the ETN products starting from Monday, however, if their disparate ratio does not get normalized, the KRX will further suspend trading.

“The leveraged ETNs are underlain twice of WTI futures price’s daily fluctuation. Therefore, if a WTI futures contracts 50 percent a day, underlying assets will fall to zero,” KRX wrote in a statement.

“Once the products slump, investors can’t recover their losses, even if oil prices rise in the future. Retail investors shouldn’t invest in those kinds of products for the long time period.”

On Wednesday, Shinhan Leverage WTI Futures ETN(H) closed at 650 won, down 255 won, or 28.18 percent from the previous session’s close, while MiraeAsset Leveraged Crude Oil Futures ETN(H) 9 fell 870 won, or 35.22 percent, to end at 1,600 won.

The market price disparate ratio of Shinhan ETN and MiraeAsset ETN soared 848 percent and 214 percent, respectively.

By Jie Ye-eun (yeeun@heraldcorp.com)
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