ProShares, Rydex suspend sale of ETFs

The move followed the emergency action announced yesterday by the Securities and Exchange Commission temporarily prohibiting short sales of shares of certain financial companies.
SEP 19, 2008
The ProShares UltraShort Financials (SKF) and ProShares Short Financials (SEF) exchange traded funds are not accepting orders for new shares, according to a statement today from ProShare Advisors LLC of Bethesda, Md. The move followed the emergency action announced yesterday by the Securities and Exchange Commission temporarily prohibiting short sales of shares of certain financial companies, the statement said. Unless notified otherwise, shares will be available for redemption as normal, according to the statement. Shares of the ProShare ETFs are expected to continue to trade today but may trade at prices that are not in line with their intraday indicative values, the company warned. The fact that ProShare had stopped sales of its two ETFs did not mean there is a problem with the ETF structure, said Michael Sapir, chief executive of ProShare and its sister company, ProFund Advisors LLC, also of Bethesda. “This unprecedented action by the SEC has limited the ways that investors can get short exposure to financials, so we were concerned we would be inundated with requests to create new shares,” he said. It would have been difficult for ProShare to keep up with such demand with fewer options for obtaining short exposure, Mr. Sapir said. Just hours after ProShare made its announcement, Rydex Investments of Rockville, Md., also announced it was halting the sale of new shares in its Rydex Inverse 2x S&P Select Sector Financial ETF (RFN). As with the two ProShare ETFs, shares of the Rydex ETF will be available for redemption. It is expected to continue to trade in the financial markets today but may trade at prices that are not in line with their intraday indicative values.

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