Barclays ETN debacle seen as unlikely to ‘end the gravy train’

Barclays ETN debacle seen as unlikely to ‘end the gravy train’

The already tarnished reputation of exchange traded notes has taken another hit in recent days, but reports of the structure’s imminent demise may prove wide of the mark.

The latest debacle saw Barclays abruptly suspend creation of new units of two of its most popular ETNs, VXX and OIL, which offer exposure to the Vix volatility gauge and crude oil prices.

It has emerged that Barclays — the second largest player in the ETN market, according to Morningstar data — only had regulatory approval to offer $20.8bn of structured notes, including ETNs, but exceeded this by $15.2bn. It will now have to buy the excess back at the original purchase price, incurring a loss of $450mn.

This was not the first blow-up in the world of ETNs. Two years ago Credit Suisse, then the biggest ETN sponsor, delisted and suspended nine leveraged and inverse ETNs from mainstream stock exchanges.

This came two years after the Swiss bank’s short volatility XIV ETN was killed off after collapsing 90 per cent in one day.

In March 2020, WisdomTree had to close its three times leveraged oil products after their value was wiped out by Covid-induced market volatility.

“ETNs have been dying a long, slow and painful death now