Moves in the oil futures market seen this week have forced WisdomTree to suspend and delist one of its oil exchange traded funds (ETFs) on Wednesday.
The price of West Texas Intermediate (WTI) oil went heavily negative earlier in the week, due to a lack of capacity for the physical delivery of oil to traders.
The episode meant the swap underlying the WisdomTree WTI Crude Oil 3x Daily Short ETP was adversely affected, leading to its termination by swap provider BNP Paribas before European markets opened on Wednesday. The ETP is listed in London, Milan and Frankfurt.
The termination was made in accordance with the severe overnight gap event (SOGE) provisions set out in the product's prospectus, a WisdomTree spokesperson said. This provision terminates the product when a 20% overnight adverse move in the price of the underlying market happens.
"The purpose of this provision is to allow the swap provider to terminate the swap before it reaches or breaches a floor of $0, where the product bears no value for investors," the spokesperson explained.
"Consequently, the product that relied on this swap will go through a compulsory redemption and we are taking all necessary measures to communicate with security holders and ensure a smooth redemption process.
"Payment is expected to be made to security holders on or around Tuesday 28 April 2020."