Nickel price surge… Nickel ETN suffering from prenatal and antenatal care

Input 2022.03.10 14:04
Edited 2022.03.10 14:06

(Photo = Getty Image Bank)

As the price of nickel skyrocketed due to the Ukraine crisis, a series of surprises are occurring in the nickel exchange-traded securities (ETN). The Korea Exchange has urged investors to exercise caution.

The Korea Exchange announced on the 10th, “As the volatility of futures prices of major commodities has increased significantly due to the recent international political instability, the ETN index value is also changing rapidly.” In this case, large-scale investment losses may occur in the process of rapid convergence of the market price to the index value.” The index value of ETN is the value of the underlying asset, and is a concept similar to the total net assets of an exchange-traded fund (ETF). The Korea Exchange added, “If the index value becomes ‘0’ due to repeated fluctuations in the value of the index, it is possible to lose the entire investment principal.”

A typical example is that nickel ETN investors are experiencing an unprecedented situation due to the recent surge in nickel prices. On the 8th, the London Metal Exchange (LME) stopped trading nickel futures. As concerns regarding the supply and demand of nickel grew due to sanctions once morest Russia, the price of nickel futures in the LME jumped regarding 250% for two days. As the market plunged into turmoil, the LME placed a superpower to close the market. On this day, the first trading day following the holiday, Daishin Securities issued a ‘information on investment advice for nickel futures ETN(H) instead’ and said, “Liquidity supply may be limited until LME resumes trading nickel futures.” It is possible, and please be careful regarding your investment.” The ETN is a product that makes profits by following the price of nickel futures traded on the LME.

Inverse products that reverse futures prices are also fluctuating. Previously, ‘Inverse 2X Nickel Futures ETN(H)’, which tracks the price of nickel futures by -2, was suspended by the Korea Exchange when the underlying index fell to 0 due to a surge in nickel prices.

The Korea Exchange also designated ‘Inverse Nickel Futures ETN(H)’ as an investment to consider for three trading days from this day, that is, until the 14th. This commodity follows the price of nickel futures in reverse of 1x. The Korea Exchange explained, “In consideration of the quotation and trading conditions, it is designated as an investment cautionary item if the exchange deems it necessary for investor protection.” During this period, if the discrepancy rate between the market price and the index value exceeds the regulation, the designation of investment significant items may be extended or trading may be suspended.

Reporter Gu Eun-seo [e-mail]

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