Dollar Bulls Smother ETF

NEW YORK (TheStreet) -- Bullish dollar investors have hobbled the PowerShares DB US Dollar Index Bullish ETF(UUP Quote), as an influx of assets has brought creation of the fund to a standstill.

As investors still try to make bullish dollar bets with UUP, the fund is now creeping to a premium.

At the heart of the ETF pricing process is the creation and redemption of new shares. The creation of new shares and the redemption of exisiting shares keeps the market price of the ETF in line with the ETF's underlying value.

Halting UUP's creation process will effectively make this ETF a closed-end fund. Investors can expect to see a disconnect between this fund market price and its underlying value. This means premiums for customers.

As of Nov. 3, PowerShares DB US Dollar Index Bullish Fund announced in a current report on Form 8-K that 6,600,000 of its Shares registered with the Securities and Exchange Commission were available for purchase by the Fund's Authorized Participants.

Today, UUP managers filed an 8K announcing that:

"As of November 5, 2009, the Fund issued all of the remaining Shares to its Authorized Participants. As a result of these issuances, the Fund will temporarily suspend the issuance of additional Creation Baskets until the registration statement on Form S-3 (333-162819, 333-162819-05) which was initially filed on November 2, 2009 and registers an additional 100,000,000 Shares of the Fund (the "Registration Statement") has been cleared by the SEC, the Financial Industry Regulatory Authority and the National Futures Association."

Most Commented

Sirius XM Tops Targets

Most Popular

Citi Shares Hamstrung