ETF News & Commentary
SAN DIEGO (ETFguide.com ) - Van Eck Global has introduced leveraged and inverse performing exchange-traded notes (ETNs) on the Euro.
The new offerings are a first for the quickly expanding menu of ETN choices.
The Market Vectors Double Long Euro ETN (Ticker: URR) seeks to replicate two-times leveraged long exposure to the Euro, plus a short-term deposit. URR tracks the performance of the Double Long Euro Index. The index will finance its leveraged currency exposure by using forward contracts in U.S. dollars.
The Market Vectors Double Short Euro ETN (Ticker: DRR) seeks to replicate two-times leveraged short exposure to the euro, plus a short-term deposit. DRR tracks the performance of the Double Short Euro Index. The Index is designed to reflect borrowing Euros and selling them short for U.S. dollars, investing the U.S. dollars for one day and converting them back into Euros to repay the lending activity.
ETNs are debt securities that can be traded at their market price or held onto until their maturity date.
If held onto until maturity, a cash payment from the issuer based on the applicable index performance, less fees is given to the investor.
Both Van Eck ETNs are based on total return indexes. This means that the ETNs' value will include daily interest based on overnight federal funds open rates which will be counted as part of the notes' return when investors redeem shares.
These particular Market Vectors currency ETNs are issued by Morgan Stanley with Van Eck Global as the exclusive marketer. The benchmark currency indices underlying the notes were developed by Morgan Stanley and are calculated and maintained by Standard & Poor’s.
According to the prospectus the annual expense ratios are 0.65 percent.
The initial tax advantage currency ETNs had over currency ETFs was overturned by an adverse IRS tax ruling in December 2007.
The rule stated that any financial instrument linked to a single currency regardless of whether the instrument is privately offered or publicly traded should be treated like debt for federal tax purposes.
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