Hi, any update on this please
There’s still some back office discrepancy being sorted out. I wish it depended on me so I could give a more clear (and normal) and backdrop, but it’s simply some redemption calculations going on between the main market maker (aka authorised participant) and the paying agent.
Optimistic scenario: end of this week. Realistic (imo) scenario: end of next week, week after. Believe me, this is prioritised and escalated to the highest level internally…
It’s not that urgent for me because it is a small chunk of my entire portfolio, but I do feel sorry for those who expected this to be a short term trade and have missed out on a lot of the current market upside because they couldn’t deploy that capital during the dips.
Safe to say I will be thinking many times over before I consider using a leveraged product again.
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I’ve been waiting a long time and the funds are a necessity for many of us.
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This is totally unacceptable! When we gona receive our money back? Week after week after week…
And after 1 month do we have some info?
Maybe hang around until at least the realistic scenario from Oktay has played out?
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Literally got it a few posts up
Welcome to counterparty risk. It’s easy to dismiss it as something minimal, but when it strikes it still hurts.
This was never a hidden phenomenon, and is a likely outcome with most derivatives.
And after those weeks? Are we sure something is going to happen or just fingers crossed.
So they can take our investments and walk away?
Nobody is taking your investment and walking away with it?
You are trading a complex instrument, on which a rather rare situation has occurred; the process to deal with such event is complex itself, and involves many different parties, resulting in some delay in settlements here and here, and probably some people too that don’t care too much down the line (cause this is indeed rather long delays!)
Still an inherent risk of most complex instruments, and you chose to ignore this risk willingly until it doesn’t play out your way. In my book, it sounds just the same as trying to get your money back when your stock went down; it’s rather childish.
It’s been 8 days since the rep said week after next.
Why do you think my investment/stock went down?
Likely… rare… inherent… by this pattern you will flip back to it being a rare occurence on your next message? They have a right to be frustrated if they aren’t allocated their capital by the agreed date in the filing, what do you think you are contributing with all of this waffle?
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I didn’t say that.
Talking about different things; complex instruments have inherent counterparty risks, which may be exacerbated in case of rare events.
Point is, don’t trade instruments you don’t understand the risks of, and don’t whine when you invested in those regardless and things don’t go smoothly.
(due to counterparty risk)
Who is the counterparty you refer to? Leverage Shares plc, the issuer? Does this mean all of their ETPs have this type of counterparty risk?
There are multiple. For one, yes indeed Leverage Shares is your direct counterparty; but the underlying investments are also executed by a partner of them (likely an investment bank).
In general, you always run into counterparty risk coming from your broker, their trading venues, and the potential agent matching your trade failing to deliver in the clearing house.
In the case of derivative, you add more parties to the process, and some aren’t as “open” as a broker, or an exchange; your trade looks more like an OTC trade.
Now, trading normally the security itself (the ETP) would mostly involve an other trader on the market, or sometimes the fund provider in case of redemption/issuing.
In this specific case though, normal trading isn’t the case; and all the multiple agents down the chain have to act one after an other, all of them maybe failing or delaying the process.
According to @Oktay (last news about it)
Quite vague, but it would appear the underlying shares have been sold by the partner, but the money hasn’t been properly cleared from the partner to the diverse brokers. Although an earlier post mentioned IBKR receiving payment, so it may be on IBKR’s side.
This shows why counterparty risk is rather low when it comes from share dealing (mainly being your broker failing), but with added parties dealing in derivative, this risk becomes significant, as exceptional events may trigger some unforeseen chain reaction; delays is a rather innocent one, but please consider that liquidity can rapidly become a real issue. And then no payment.
Edit: actually latest news narrow it down to the paying agent on the market maker’s side
without knowing more of the underlying structure, the MM is either directly LS’s partner, or is simply making the market for the partner.
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Yes, and pretty much all and any derivative, to some various extents.
An option contract always carry the risk that the underwriter cannot honor the contract, but the exchange tries to provide some safety for the buyer by collateral requirements from their brokers.