Russian ETF sparks trading frenzy similar to stocks

A trader works on the floor on the last day of trading before Christmas at the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., December 23, 2021. REUTERS/Andrew Kelly

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NEW YORK, March 2 (Reuters) – Beaten shares of Van Eck’s Russian ETF (RSX.Z) are drawing renewed interest from traders and drawing comparisons to last year’s frenzy in the so-called “meme” actions.

Designed to track the performance of the MVIS Russia Index (.MVRSXTR), the ETF has fallen 65% in the past two weeks as Russia’s invasion of Ukraine and Western sanctions cause massive swings country-related assets.

Its sharp drop accelerated trading in ETF stocks and options, largely driven by retail investors, analysts said.

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With the ETF’s price swinging wildly – it fell as much as 15% before recovering to climb as much as 6% on the day – trading volume in ETF shares jumped to 27 million at 2:30 p.m. (7:30 p.m. GMT), roughly double the average daily amount, according to data from Trade Alert.

Options on the ETF were even busier, with 211,000 contracts traded, four times the expected volume.

Garrett DeSimone, head of quantity at OptionMetrics, said some of the volume appeared to be boosted by traders trying to take advantage of the stock’s extremely high volatility.

“These high levels of volatility are extraordinary, causing the VanEck Russia ETF to behave similarly to a stock meme,” he said.

“It looks like retail definitely has its fingerprints on RSX options trading today,” DeSimone said.

Sentiment was mixed, with some traders betting on a quick rebound while others hoped for a continued fall in stocks, based on the choice of options contracts traded.

The close of Russian markets for the third day in a row posed another challenge to properly pricing the ETF, causing the trading price to deviate from its net asset value (NAV) – or the value of each ETF share depending of its share of the fund’s assets. underlying assets, according to analysts.

On Monday, shares of the ETF ended the day at a 178% premium to its net asset value, according to data from VanEck.

“It makes stock trading much more speculative,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research.

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Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Jonathan Oatis

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