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Why Barclays Suspended 'OIL,' 'VXX' Creations

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It turns out that an error at Barclays Bank PLC led to the suspension of creations for two of its ETNs earlier this month.

On March 14, Barclays halted new share creations of the iPath Pure Beta Crude Oil ETN (OIL) and the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX).

At the time, the firm specifically said it was not due to Russia’s invasion of Ukraine, which had brought turmoil to the markets, or other market dynamics, but was because the bank lacked the issuance capacity to create any further shares in the two ETNs.

Barclays said that it would return the ETNs to normal operations as soon as it could accommodate demand for future issuances.

However, today, a press release from the bank added some additional color. It turns out that the firm had overissued shares of the ETNs, exceeding the amount that had been allowed by its shelf registration statement for a period of roughly one year, according to the document.

A footnote in the press release notes that the firm registered to a maximum aggregate offering price of $20.8 billion, an amount that it exceeded by roughly $15.2 billion.

The document also says that under the “right of rescission,” which allows consumers to cancel a loan agreement that they have entered into, it will repurchase some of the issued ETNs at their original purchase price. The “right of rescission” is more typically seen with transactions such as mortgage loans, but it means that the estimated loss to the firm is roughly $592 million, or £450 million.

Barclays further noted that the situation means that it will postpone its planned buyback program from the first quarter to the second quarter.

Barclays’ lineup of iPath ETNs in the U.S. currently includes 27 products with nearly $3 billion in assets under management.

Contact Heather Bell at heather.bell@etf.com

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