Exchanges halt trading of several Russian ETFs after sharp price swings

Interested in ETFs?

Visit our ETF hub for news and investor insights, market updates and analysis, and easy-to-use tools to help you select the right ETFs.

Stock exchanges in the United States and mainland Europe halted trading in a number of Russian exchange-traded funds that had continued to operate increasingly wildly this week after the Moscow stock exchange closed. Monday.

The New York Stock Exchange ceased trading in Russian ETFs from BlackRock and Franklin Templeton and the NYSE also imposed a regulatory halt on Direxion’s double-leveraged Russian Bull ETF.

Trading in BlackRock’s European-listed iShares Russia ETF, known as CSRU, has also been suspended by Deutsche Börse, Euronext and Borsa Italia. In addition, Euronext also suspended BlackRock’s iShares MSCI Eastern Europe (IEER) ETF, which has a 67% weighting in Russian stocks.

The move by several exchanges to impose a stoppage is highly unusual. ETFs have been able to continue to operate in the past when problems arose in other stock markets, including Greece, China and Egypt, leading to sometimes prolonged suspensions from trading in the underlying stocks.

“This is the first time I have seen an exchange suspend trading of an ETF. Investors now have no way out and will effectively have to wait for trading to be restored,” said Manooj Mistry, Director of the operating at HANetf, a London-based asset manager.

The pricing of Russia-focused ETFs listed in the United States and Europe has become very erratic this week as most of the underlying securities are not trading due to sanctions and the closure of the Moscow exchange. Russian companies that have cross-listings on international markets have seen their stock prices drop to almost zero.

BlackRock said it “strongly supports” the decision made by the various exchanges.

BlackRock’s NYSE-listed iShares MSCI Russia ETF (ERUS) saw its assets under management fall from $516 million at the end of January to $1.6 million at the close on March 3. BlackRock suspended creation orders for ERUS on March 1 so that no new cash could enter the ETF, but the move was followed by further extreme price disruptions. ERUS saw its net asset value drop nearly 88% on March 3 alone, while the ETF’s price ended the trading session with a 7,039% premium to its net asset value.

The Franklin FTSE Russia ETF (FLRU) saw the value of its assets fall from $22 million at the end of January to less than $0.4 million on March 3. It also suffered massive price upheavals with a 73.6% decline in net assets. value on March 3, causing the ETF’s price to close at a premium of 1,868% to its net asset value.

“Trading All Russia-Focused ETFs [this week] was based purely on speculation and is not well linked to the net asset value of the constituent securities of these funds, increasing the risks investors face,” said Todd Rosenbluth, Head of ETFs and Funds Research. mutual funds at CFRA Research.

Direxion had previously announced that its double-leveraged Russian ETF would close on March 11 and then liquidate on March 18, with any remaining money to be returned to investors.

However, the VanEck Vectors Russia ETF (RSX) and the VanEck Russia Small-Cap ETF (RSXJ), which are both listed on the BZX exchange operated by CBOE Global Markets, continued to trade during the week ending on March 4.

“Cboe is monitoring developments regarding these securities and is in communication with regulators and issuers,” an exchange spokesperson said.

Deborah Fuhr, founder of ETFGI, an advisory group, said the NYSE’s decision to order a halt to trading in Russian ETFs would create pressure on other stock markets to impose similar restrictions.

Trading in London and Dublin was suspended on March 3 for Invesco’s Russia ETF, known as RDX, as well as FinEx Tradable Russian Corporate Bonds Ucits ETF (FXRU). The decision to suspend was made by the fund managers in both cases and not by the exchanges.

After the close of trading on Friday, the London Stock Exchange announced that it had suspended trading in Russian ETFs managed by BlackRock, HSBC, DWS, Lyxor and ITI funds.

The CBOE also announced on Friday after the US shutdown that it had halted trading of the two Van Eck Russia ETFs known as RSX and RSXJ.

Seventeen Moscow-listed Russian ETFs were also unable to trade this week due to the stock market shutdown following Russia’s invasion of Ukraine.

Interested in ETFs?

Visit our ETF hub for news and investor insights, market updates and analysis, and easy-to-use tools to help you select the right ETFs.