(Adds data on market for the notes, VelocityShares comment)
By Trevor Hunnicutt
NEW YORK Dec 9 Credit Suisse on Friday
said it would lower investors' hurdle to redeeming two popular
exchange-traded notes, used to bet on the price of oil, after it
delisted the products in a surprise move this week.
VelocityShares 3x Long Crude Oil ETN became the
largest product of its kind delisted from U.S. exchanges after
Thursday trading. VelocityShares 3x Inverse Crude Oil ETN
was also delisted.
The move comes as the bank's earlier decision not to offer a
new option for investors to redeem the oil-trading notes raised
the prospect that some investors who failed to find buyers would
not be able to trade the notes for what they are worth - or at
Investors who managed to sell the notes in an
"over-the-counter" netherworld on Friday, after the delisting,
did so at discounts to their estimated value that in
some cases exceeded 10 percent, Thomson Reuters data
Nearly 3.4 million notes changed hands Friday.
Credit Suisse AG, in a statement, said investors
can now use an early redemption option if they have 500 of the
notes, down from the 25,000 previously required. The company
declined to comment further.
Investors with fewer than 500 of the notes will still
ostensibly have to find a buyer elsewhere. The notes are not set
to officially expire until 2032.
The ETNs promise to magnify or deliver the opposite of oil
price gains, allowing investors to book huge profits when oil
prices rise or fall but also creating the potential for massive
Despite their complexity, the notes are widely used by
individual retail investors.
Not withstanding the delisting, there were $745 million of
the notes still circulating on Thursday, when they were pulled
off the exchange.
Investors hold $22 billion of U.S. ETNs, which constitute a
pledge by an issuer. Payouts are based on the performance of the
underlying asset, but the notes do not "hold" those assets,
unlike ETFs, to which they are often compared.
VelocityShares, a service provider for the notes and unit of
Janus Capital Group Inc, said late Thursday it was
launching two new ETNs as an alternative to the existing
product. The new notes are backed by Citigroup.
VelocityShares declined to comment further.
(Reporting by Trevor Hunnicutt; Editing by Jonathan Oatis)