Citigroup has entered the exchange-traded notes market in the US with the launch of the C-Tracks Exchange Traded Notes linked to the bank's Volatility Index Total Return.
Citi is pre-marketing the ETN to institutional accounts and has unveiled plans to launch more C-Tracks ETNS in 2011. It is not yet able to say how new products will be structured or whether they will include features such as capital protection or leverage.
"We are going to enter the ETN space in the US market, because we believe Citi can offer added value to what is currently provided by our competitors," said Barbara Mullaney, head of Citi's cross asset group for the Americas and EMEA. "It is a space where ETNs linked to our proprietary indices... can provide investors with a better beta access product than the majority of the ETNs we see out there."
The C-Tracks ETNs provides directional exposure to the implied volatility of the large-cap US stocks in the underlying index. Index methodology combines daily rolling long exposure to the third- and fourth-month CBOE Volatility Index futures with short exposure to the S&P 500 Total Return Index.
Citi claimed the daily beta of its Volatility Index Total Return has historically been around twice that of similar competitor indices, but did not disclose details. The listing of the new ETN at the NYSE Arca is planned for next week.