Lyxor merges USD/EUR share classes for S&P 500 VIX ETF

Sep 6th, 2017 | By | Category: ETF and Index News

Lyxor has announced in a letter to shareholders that it is merging the US dollar-denominated and euro-denominated share classes of the Lyxor S&P 500 VIX Futures Enhanced Roll UCITS ETF.

Lyxor merges USD/EUR share classes for S&P 500 VIX ETF

As of 3 October 2017, the euro-denominated share class of the Lyxor S&P 500 VIX Futures Enhanced Roll UCITS ETF will absorb its US dollar-denominated counterpart.

As of 3 October 2017, the euro share class will absorb its US dollar counterpart and the US dollar-denominated share class will cease to exist. Shareholders of the US dollar share class who do not wish to participate in the merger are entitled to redeem their holdings free of charge up until the end of trading on 2 October 2017.

The ETF is listed on Euronext in US dollars, and on Euronext, Borsa Italiana and Xetra in euros with the ticker LVO. The fund tracks the S&P 500 VIX Futures Enhanced Roll Index, a second-generation volatility index that dynamically switches between a short-term VIX futures and a mid-term VIX futures, based on their relative implied volatility, in order to model a cost-efficient exposure to volatility in the broad equity market.

The VIX represents the implied volatility of US equities, derived from option pricing on the S&P 500. It is a measure of the market’s expectation of stock market volatility over the next 30-day period.

Apart from the difference in trading currency the two share classes are identical. Both treat income generated within the fund as accumulating and each charges a total expense ratio (TER) of 0.60%. According to Lyxor, the merger will help to increase the liquidity of the ETF.

While the VIX has been trailing at persistently low levels (LVO is down 52.2% year-to-date), recent stirrings in the index has prompted some market commentators to warn of a possible correction in the US equity market. Michael Arone, chief investment strategist at State Street Global Advisors, for example, points to the debt ceiling debate currently evolving in the US Senate as a possible trigger to deliver a dose of volatility to mellow markets (See: “SPDR ETFs: Will debt ceiling debate end low volatility?”). An increase in volatility would bring significant returns to LVO.

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