Many traders were understandably disappointed when Credit Suisse (SIX:CSGN) unexpectedly announced they would shutter their two triple leveraged oil funds next month, but another issuer is wasting no time in stepping up to provide an alternative.
US Commodity Funds, which operates the most popular oil fund (USO (NYSE:USO)) just filed to offer a brand new fund with triple leverage toward crude oil. Instead of using derivatives to achieve leverage — and thus opening it up to SEC scrutiny — the new fund will be a commodity pool. Commodity-based funds, as you may or may not know, are governed not by the SEC, but by the Commodity Futures Trading Commission (CFTC).
That means there’s little risk to regulatory interference, which is the likely reason why Credit Suisse pulled the plug on its popular VelocityShares 3x Long Crude linked to S&P GSCI Crude Oil Excess Return (NYSE:UWTI) and VelocityShares 3x Inverse Crude linked to S&P GSCI Crude Oil Excess Return (NYSE:DWTI) to begin with. From ETF.com:
[While] 3x leveraged S&P 500 funds may face a tough 2017, if you stick to futures-based exposures, like commodities and volatility, the SEC is going to stay out of it.
Is there some risk the CFTC decides to start paying attention? It’s unlikely. The CFTC is down to three commissioners, which means that they are literally unable to talk to each other in the hallways because of “sunlight” rule provisions that prevent private meetings of a majority.
So fear not, thrill-seeking traders. You should have a new instrument to give you massive exposure to oil in the near future.
The VelocityShares 3X Long Crude ETN linked to the VelocityShares 3x Long Crude linked to S&P GSCI Crude Oil Excess Return (NYSE:UWTI) closed at $22.35 on Wednesday, up $4.49 (+25.14%) amid an OPEC-fueled massive spike in oil prices.