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Two Oil ETFs Closing, New Ones on the Way
April 24, 2008
SAN DIEGO (ETFguide.com) - MacroShares Oil was launched on the American Stock Exchange in late
2006, as a new class of patented securities that resemble exchange-traded funds (ETFs).
MacroShares Oil’s unique paired structure is comprised of an Up Trust (Ticker: UCR) and a Down Trust (Ticker: DCR) that are equally collateralized. As MacroShares Up increases in value, MacroShares Down decreases in value by the same dollar amount.
To date, the MacroShares have gathered over $300 Million in assets and are trading in the vicinity of three million shares per day.
On
April 16th light sweet crude oil futures closed above $111 for three consecutive days which triggered an early termination event for the securities.
Here's what happened: As the Up-MacroShares trust increased in value, the Down-MacroShares Trust decreased in value by the same dollar amount. The reference price of oil at inception was $60. When this threshold surpassed $111 it meant 85% of the Down Trust’s (DCR) assets were pledged to the Up Trust (UCR). When the reference price of oil closed at $111 for three consecutive business days, early termination event was triggered.
UCR and DCR were issued with an original base value of $60. A 185% price movement in either direction would result in the above termination trigger.
MacroShares have a unique patented structure based upon "paired" securities which is comprised of an Up-MacroShares Trust and a Down-MacroShares Trust. At inception the trusts were equally collateralized, which was maintained through the paired creation and redemption process.
On July 3rd, a final distribution will be made to UCR and DCR shareholders of records as of June 30th. The underlying value of the trusts will be determined based on the June 25th closing price of the NYMEX light sweet crude oil futures contract for August.
UCR and DCR were set up as grantor trusts, which means investors will be receiving 1099 tax statements.
MacroShares has already filed with the SEC for a new Up and Down Trust. The base value of the trust will be $100. According to the filed prospectus, the projected expense ratio is 0.95%.
The new Up and Down Trust will be set up under a partnership structure, thus income will distributed via a K-1 tax form.
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