Well, they’re gone.
Lehman Brothers exchange-traded notes, the first ETNs to close, officially delisted from the NYSE Alternext U.S., the former American Stock Exchange, on Wednesday. Lehman’s Opta Exchange-Traded Notes tracked the Lehman Brothers Commodity Index Pure Beta Agricultural Total Return; while Lehman’s Opta Exchange-Traded Notes was linked to the Lehman Brothers Commodity Index Pure Beta Total Return. The Opta S&P Listed Private Equity Index Net Return ETN, which tracked 30 companies whose primary business is private equity investing, traded on the NYSE Arca.
While ETNs and ETFs are often lumped together, they aren’t the same animal. ETNs and ETFs are both exchange-traded products that track an index, but ETFs hold the underlying assets of the index they track, while ETNs don’t. ETNs are senior subordinated debt issued by a bank. It’s a promise to pay the indexes return. But when a firm goes bankrupt, like Lehman Brothers did, that promise isn’t worth the paper it’s written on. Investors in the Opta notes will join the long list of creditors in bankruptcy court making a claim on Lehman’s assets.
Barclays, which bought many of Lehman’s assets after the firm went under, will not be taking on the obligations of the ETNs. Barclays created the ETN concept and currently sells them under the brand name iPath. While taking on the Lehman ETNs would have made sense for Barclays, the bank didn’t want to take on any of Lehman’s other debt obligations. In addition, acquiring the Opta’s would have opened Barclays up to the risk of litigation. Considering the three funds together had less than $15 million in assets, it wasn’t worth it.