ETF's from Dorsey Wright

The Wall Street Journal had a headline article entitled, "Deutsche Bank to Close a Popular Oil Fund." The subtitle gave even more specific information:
"'Double Long' ETN Is Victom of Scrutiny of Exchange-Traded Investments With High Leverage."
In a nutshell, due to the crackdown by regulators with respect to position limits, the PowerShares DB Crude Oil Double Long ETN [DXO] will be shutting down, effective September 9th. At that time, DB said it will be redeeming all DXO shares, of which amount to something around a $425 million market cap. After having launched in June 2008, the DXO had grown into one of the most popular leveraged commodity ETN's. As a result of this popularity, the ETN had reached a size that brought into play an issue of position size limits that are allowed by the CFTC with respect to Crude Oil futures. Technically speaking an ETN does not physically own futures contracts, but it does obligate the issuer (Deutsche Bank in this case) to provide a return to the investor as if the ETN held such contracts. To fulfill this obligation without absorbing massive leverage of their own Deutsche Bank would need to do one of two things: 1. attract an equal amount of assets in a double leveraged inverse oil ETN to balance risk, or 2: hedge their own risk by purchasing Crude Oil Future Contracts on their own. There is a DB UltraShort Oil ETN [DTO], but it does not currently have assets approaching the $425 Million in DXO, in fact is has less than $200 Million under management, which brings us to option #2.
The problem arises when position limits are reached, and therefore no more buying of the underlying contract (commodity) can occur. This obviously makes it harder for the ETN to track its underlying index because the issuer can no longer issue new shares and also hedge their own balance sheet risk. For those that do own DXO, Deutsche Bank has said they will determine the "repurchase value" on September 9th, but ETNs may be redeemed from the issuer at the close of any session. We will keep you abreast of this latest, albeit discouraging, development as more news becomes available