A Very Active Month for ETF Splits
ETF Splits and Reverse Splits in September 2015
For whatever reason, September was an active month for ETF splits. State Street Global Advisor split some of their exchange traded products and Accu Shares and Credit Suisse reverse split some of their products as well. Direxion is reverse splitting their offerings on October 1st, too. So as I said, we definitely saw more "split activity" than usual.
And for those who are unfamiliar with ETF splits, I've broken down how they word for regular splits, ration splits and reverse splits...
First up are the SPDR splits from State Street. These funds split on September 8th, nine of which were 2 for 1 splits...
- MTK - SPDR Morgan Stanley Technology ETF
- XAR - SPDR S&P Aerospace & Defense ETF
- XHE - SPDR S&P Health Care Equipment ETF
- XHS - SPDR S&P Health Care Services ETF
- XPH - SPDR S&P Pharmaceuticals ETF
- XRT - SPDR S&P Retail ETF
- XSD - SPDR S&P Semiconductor ETF
- XSW - SPDR S&P Software & Services ETF
- XTN - SPDR S&P Transportation ETF
The ETF provider also split - XBI, the SPDR S&P Biotech ETF, however, that was a 3 for 1 split as opposed to the other SPDRs above, which were 2 for 1. And the reasoning behind the splits, according to SSgA, was - These share splits will make the 10 SPDR ETFs more affordable for investors through lower trading costs and provide greater efficiency in the creation and redemption process, which leads to the potential for increased liquidity.
Next, we have the leveraged commodity ETNs that were reverse split on September 10th by Credit Suisse..
- UWTI - The Velocity Shares 3x Long Crude Oil ETN
- UGAZ Velocity Shares 3x Long Natural Gas ETN
UTWI underwent a 1 for 10 reverse split while UGAZ reverse split for 1 for 5.
After that we had two volatility funds that underwent reverse splits...
- VXUP - Accu Shares Spot CBOE VIX Up Shares ETF
- VXDN - Accu Shares Spot CBOE VIX Down Shares ETF
Both of these volatility ETFs underwent a 1 for 10 reverse split
And the last split to announce is happening on October 1st by Direxion. These splits were originally slated for September, but are now scheduled for October. All six funds are leveraged funds and a few are inverse funds as well. They will all reverse split, but at different ratios.
- FAZ - Direxion Daily Financial Bear 3X Shares, will reverse split 1 for 4
- GASL - Direxion Daily Natural Gas Related Bull 3X Shares, will reverse split 1 for 5
- JNUG - Direxion Daily Junior Gold Miners Index Bull 3X Shares, will reverse split 1 for 5
- JDST - Direxion Daily Junior Gold Miners Index Bear 3X Shares, will reverse split 1 for 5
- NUGT - Direxion Daily Gold Miners Index Bull 3X Shares, will reverse split 1 for 10
- TZA - Direxion Daily Small Cap Bear 3X Shares, will reverse split 1 for 4
ETF and stock splits are always announced ahead of time, which gives you a chance to prepare or adjust your trading strategies if needed. However, in case you missed any of the announcements or own any of the funds that are splitting on October 1st, I wanted to make sure you were aware.
And after any split (regular, ratio or reverse) make sure your account settles correctly and you have the new proper amount of shares. Banks and Clearing Firms can make mistakes. So double check you math.
And as with any investment, a company stock, mutual fund, an ETF, Index or otherwise, please make sure you thoroughly research this exchange traded fund or any financial asset before making any trades (long or short). Conduct your due diligence, watch how these funds react to different market conditions, especially after they split. Take a look under the hood and see what is in the funds. And if you have any questions or concerns, make sure you consult a stock broker, a financial advisor, or another financial industry professional.
While ETFs have many advantages, they have many disadvantages as well (as does any investment).
So it is very important to understand the investment vehicle before you trade it.
Disclaimer: At the time of publication, I do not have any open positions in the above funds - Mark Kennedy