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What Happened to Trades in This Financial ETF on Monday?
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Guggenheim S&P Equal Weight Financial ETF fell victim to the recent separation of the REIT segment from the broader financial sector. As per barrons.com, exchange officials on September 19 morning, abandoned over 1,000 trades associated about 580,000 shares of RYF. Officials termed the trades as “clearly erroneous.” The entire confusion emanated from the independence that the real sector recently received (see all real estate ETFs here).
Investors should note that real estate investment trusts or REITs, which were long part of the broader financial sector, got a free status from September 1 with the S&P Dow Jones Indices and MSCI Inc., forming the new Real Estate Sector under the Global Industry Classification Standard (GICS) (read: What ETF Investors Need to Know About the New Real Estate Sector).
The sector has been renamed “Equity REITs” while Mortgage REITs continue to be part of the financial sector. This new eleventh sector in the S&P 500 makes up for about 20% of the financial services sector (read: Can REIT ETFs Really Enjoy Independence?).
As a result, one or perhaps more trading firms were alleged to have miscalculated ETF prices. Fund issuer Guggenheim indicated that the trades did not truly adjust the changes in the price of RYF “after a special in-kind distribution of shares of [Guggenheim S&P 500 Equal Weight Real Estate ETF] were made on last Friday’s declaration date.”
Consequently, market surveillance personnel had to interfere. “Pursuant to Rule 11890(b) NASDAQ, on its own motion, in conjunction with BATS, NYSE-Arca and FINRA has determined to cancel all trades in security Guggenheim S&P Equal Weight Financial ETF which were executed in NASDAQ between 9:24:00 and 9:27:00 ET at or above $34.01.”
At market close on September 19, 2016, an RYF share was valued at $31.02. Because of the legal massacre, shares are down over 29% on the same day. The fund has an asset base of $166 million. On the other hand, shares of EWRE were up about 0.9% on September 19, 2016.
After the recent changes in the financial sector, RYF has 32.6% holdings in insurance followed by 26.1% in banks, 21.7% in capital markets and about 11% in diversified financial services. Consumer finance accounts for over 7.6% of the basket while others make up about 1.1% of the portfolio (see all financial ETFs here).
Though shares slumped on September 19, we believe things will return to normalcy in the due course of time. RYF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Best Sector ETFs for a Rising Rate Scenario).
On a separate note, like Guggenheim, the issuer of Financial Select Sector SPDR ETF (XLF - Free Report) also announced a special dividend, to be paid to XLF shareholders in shares of Real Estate Select Sector SPDR (XLRE - Free Report) to adjust the changes related to real estate holdings.
Want more information on the world of ETFs? Make sure to check out the podcast below where we discuss the investing landscape with Kevin O’Leary and Connor O’Brien of O’Shares Investments:
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What Happened to Trades in This Financial ETF on Monday?
Guggenheim S&P Equal Weight Financial ETF fell victim to the recent separation of the REIT segment from the broader financial sector. As per barrons.com, exchange officials on September 19 morning, abandoned over 1,000 trades associated about 580,000 shares of RYF. Officials termed the trades as “clearly erroneous.” The entire confusion emanated from the independence that the real sector recently received (see all real estate ETFs here).
Investors should note that real estate investment trusts or REITs, which were long part of the broader financial sector, got a free status from September 1 with the S&P Dow Jones Indices and MSCI Inc., forming the new Real Estate Sector under the Global Industry Classification Standard (GICS) (read: What ETF Investors Need to Know About the New Real Estate Sector).
The sector has been renamed “Equity REITs” while Mortgage REITs continue to be part of the financial sector. This new eleventh sector in the S&P 500 makes up for about 20% of the financial services sector (read: Can REIT ETFs Really Enjoy Independence?).
As a result, one or perhaps more trading firms were alleged to have miscalculated ETF prices. Fund issuer Guggenheim indicated that the trades did not truly adjust the changes in the price of RYF “after a special in-kind distribution of shares of [Guggenheim S&P 500 Equal Weight Real Estate ETF] were made on last Friday’s declaration date.”
Consequently, market surveillance personnel had to interfere. “Pursuant to Rule 11890(b) NASDAQ, on its own motion, in conjunction with BATS, NYSE-Arca and FINRA has determined to cancel all trades in security Guggenheim S&P Equal Weight Financial ETF which were executed in NASDAQ between 9:24:00 and 9:27:00 ET at or above $34.01.”
At market close on September 19, 2016, an RYF share was valued at $31.02. Because of the legal massacre, shares are down over 29% on the same day. The fund has an asset base of $166 million. On the other hand, shares of EWRE were up about 0.9% on September 19, 2016.
After the recent changes in the financial sector, RYF has 32.6% holdings in insurance followed by 26.1% in banks, 21.7% in capital markets and about 11% in diversified financial services. Consumer finance accounts for over 7.6% of the basket while others make up about 1.1% of the portfolio (see all financial ETFs here).
Though shares slumped on September 19, we believe things will return to normalcy in the due course of time. RYF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Best Sector ETFs for a Rising Rate Scenario).
On a separate note, like Guggenheim, the issuer of Financial Select Sector SPDR ETF (XLF - Free Report) also announced a special dividend, to be paid to XLF shareholders in shares of Real Estate Select Sector SPDR (XLRE - Free Report) to adjust the changes related to real estate holdings.
Want more information on the world of ETFs? Make sure to check out the podcast below where we discuss the investing landscape with Kevin O’Leary and Connor O’Brien of O’Shares Investments:
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>