1x ETPs: NIO Now ISA Eligible

Hi Guys,

Based on requests we’ve been getting for non-leveraged ETPs here at Leverage Shares, I wanted to let you know that we’ve brought to market Europe’s first 1x Tracker ETPs.

How do they work?

They track single stocks like NIO, Baidu, Tesla, Coinbase and others on a 1-to-1 basis (no leverage).

Advantages?

  • ISA eligible: You can now get exposure to the most popular Asian stocks in your ISA

  • 3 Currencies: GBP / EUR / USD

The awesome T212 team has already made them fractional, so you can add them to your pies!

Here are a few slides for more info👇



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Am I right in thinking the charge is 0.15%? That’s not bad, if so. Can certainly see the use case.

Edit: Cost is confirmed in graphic above.

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Hey @topher yep, you’re right - it’s 0.15%.

Interesting. How about TSM also

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Thanks for the suggestion @Mofojonno - I’ll check to see if it matches certain criteria and if so, we can include it in an upcoming batch. Cheers.

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Hot stuff, this is big! Thanks.

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Now this is fairly interesting stuff @Oktay

I checked it and this actually skirts around HMRC rules nicely and looks completely legitimate well done.

My only question is though trading hours.

As far as I know, ETPs buy the underlying asset at market open and sell it at market close, reflecting the change. To make it interesting lets consider an interesting instrument: “Bilibili Inc.” (This is interesting because the ADR is converted 1to1 from 9626.HK to BILI.NY class Z shares only while class Y is irrelevant since they are held by directors only)

To make things readable lets open all exchanges in GMT and lets convert all prices to USD

Can you help me out filling in following timeline?

01:30 HKG opens 9626.HK price 120$
08:00 HKG closes 9626.HK price 125$
08:00 LSE opens [Leverage shares buys 1x what? at what price?]
08 —> 14:30 what price does the ETP track?
14:30 NYSE opens BILI price 126$
14:30 ----> 16:30 again what price we are tracking?
16:30 LSE closes [Leverage shares sells 1x what? at what price?]
21:00 NYSE closes BILI price 127$

next day:
01:30 HKG opens 9626.HK price 127$
------->assume big news for BILI so it jumps to 137$
08:00 HKG closes 9626.HK price 137$
08:00 LSE opens [Leverage shares buys 1x what? at what price?]

I am gonno assume LSE will try to buy at 137$?

so for a person holding 1 BILI.NY ADR or 1 9626.HK share before our timeline started, they gained 17% But (I can only speculate this) the “BILI ETP” on LSE can only track this share 15% of the time it is traded. (2 hours out of 13 hours it is traded actively) and will end up 1.5% profit. (only price increase recorded while ETP was tracking a share was 125 to 127)

Can you point out if I’m missing something?

Glad it’s useful @nickspacemonkey :slight_smile:

Hey @kali - good questions! Let’s see if I can clarify some of these.

Off the bat, just to let you know:

  1. The ETP (in the case of Asian underlyings) tracks the US-traded ADR. So in terms of how well the ADR tracks the HK-listed underlying might be a separate topic on its own, even though on many occasions the ADR leads to ‘better’ price discovery - due to higher volume in the US ADR and the actual ability to short in this ‘foreign’ market.

  2. For these ETPs, we don’t “buy the underlying asset at market open and sell it at market close ”, as you describe it. They are a lot simpler: we only buy and sell them when there is (respectively) a subscription or a redemption – and we always do it at US market close where the ADR trades. This is unlike our short & leveraged ETPs, which rebalance daily to ensure they offer every day the their stated leverage factor (and as such there is daily buy/sell activity at close of US market).

  3. We only price the ETPs once a day by reference to the closing prices in the US of the underlying US ADR (NAV).

What you are describing is their trading during European trading hours (as they are listed in London, Paris and Amsterdam), which is driven by BNP, our dedicated market maker, and the natural flow on these exchanges (BNP simply ensure there are always executable quotes at tight spreads and for a minimum liquidity).

08:00 LSE opens for trading.

  • Since the market maker is hedging with the ADR, the ETP would track the price based on where the ADR closed in the US and any overnight movements btw US close and LSE open. As mentioned, the official close price in the US is the basis for the NAV calculations of the ETP.

08:00 —> 14:30

  • The ETP tracks where BILI is expected to trade while the US markets are closed. The market maker (BNP) will offer prices during EU hours based on any trading on the underlying and any instrument tracking the underlying: cross listings of GDRs , futures, pre-market trading - basically anywhere there’s liquidity + correlation. Also, keep in mind that US pre-market opens at 9AM LDN time, so there aren’t as many off hours as many might think. But honestly, since the intraday pricing is done independently by BNP I don’t want to pretend to know more than I do :slight_smile:

14:30 —> 16:30

  • The ETP should move in closer correlation with the actual ADR trading in the US, as this is where most of the liquidity will start building. But again, BNP will trade anywhere there is liquidity to ensure the arbitrage pricing discrepancies and can quote tighter around fair price. This may be the ADR itself but also other instruments (although we believe they will mostly use the ADR from open of business).

21:00

  • NYSE closes and that close price is the basis for the NAV calculations for the ETP. Hence, any large moves up/down between LSE close (16:30) and NYSE close (21:00) should be reflected in next day’s open (of course, barring any news released overnight that may offset these).

In general, checking the performance of the GDR in Frankfurt should give a pretty good indication of whether the 1x ETP is in line with the ‘fair value’ of the stock being tracked during European trading hours. Hope this helps!

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Ahh, you know what, this actually makes it a lot more simpler like you said. Since they are not leveraged you hold the underlying assets longer than “trading hours” so essentially this behaves like an “ETF that only has one share” (correct me if that’s wrong)

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That’s right, this is how it behaves.

So in simple terms this ETP tracks the price of NIO and can be purchased in an ISA?

So tomorrow NIO drops 10% then this instrument drops 10% and if goes up the same thing?

Same as buying outside the ISA minus the 0.15% management fee?

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Yep. It’s like an ETF with only 1 stock.

But for sure, that @Oktay will explain more, if you need it so.

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Yes, as @RLX put it - it’s like an ETF that with a single stock.

Exactly - the idea is that the ETP tracks the price of NIO. Whatever NIO does, that’s what the ETP should track and of course, the ETP can be held in an ISA while NIO stock cannot. The management fee is 0.15% annually, with the ETP being tradable in $, €, and £.

This is all super cool, good job! Just bought a bunch today, literally what I was looking for the long game

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trying to work out the names of these so I can find them in trading212 - what should I be looking for? Cos typing in NIO, just present well…Nio ?

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really?
within this “mobile first” garbage designed by no prior search experience, when you type NIO you get all sorts of garbage including but not limited to ETPs

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Hey @chad5k1 - The easiest way would be to type in “1x NIO” / “1x Baidu” / etc.

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An easy option for be more user-friendly, would be to have a dedicated ETNs category. :wink:

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