Direxion lifts creation ban on leveraged junior gold miners ETF

Apr 24th, 2017 | By | Category: Commodities

Direxion has lifted the temporary suspension on creation units for the Direxion Daily Junior Gold Miners Index Bull 3X Shares ETF (NYSE: JNUG) that had been in place since 13 April.

Direxion lift temporary ban on creation units for Daily Junior Gold Miners Index Bull 3X Shares

The Daily Junior Gold Miners Index Bull 3X Shares ETF has seen its AUM drop from $1.1bn to $890m in the week after the ban on creation units was enforced.

The suspension and subsequent return to normal trading were linked to recent structural issues surrounding the MVIS Global Junior Gold Miners Index, which underlies JNUG, and the VanEck Junior Gold Miners ETF (NYSE: GDXJ), which tracks the same index. (See: VanEck’s junior gold miners ETF to broaden index coverage).

MVIS Indices, the creator of the index, had been forced to expand the coverage of the underlying index after GDXJ became too large to track it without falling foul of regulators. Due to the surge in AUM of GDXJ this year, the ETF currently owns large stakes in some of the companies in the underlying index, with additional purchases raising the possibility of surpassing regulatory limits, hence the need for index expansion.

A similar issue seems to have hit JNUG, with Direxion stating the suspension was “due to the limited availability of certain investments or financial instruments used to provide requisite exposure to the MVIS Global Junior Gold Miners Index.”

Around 70% of the market value of the holdings of JNUG consists of shares and swaps of GDXJ. Some market commentators think the likely problem was that additional swaps on GDXJ became too difficult to buy. The assets under management of JNUG have seen a steep rise from around $100 million at the start of 2016 to nearly $1.4 billion in January 2017. Following the suspension, assets fell from $1.1bn on 18 April to $890m on 24 April.

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