Barclays to Shut 21 ETNs a Year After 'Staggering' Note Blunder

What You Need to Know

The SEC says Barclays sold about $17.7 billion of securities in unregistered transactions; it agreed to pay $361 million to resolve the charges.

Barclays Plc is axing nearly half of its U.S.-listed exchange-traded notes a year after revealing a paperwork error tied to its products that cost the bank hundreds of millions of dollars.

The U.K.-based lender announced Tuesday it will redeem 21 of about 50 ETNs in June.

The $71 million iPath Series B Bloomberg Copper Subindex Total Return ETN (ticker JJC) is the largest of the notes being closed, which hold around $533 million assets in total.

The redemption announcement comes less than 13 months after Barclays said it had erroneously sold $15 billion more structured notes and ETNs over the course of about a year than it had registered for.

The bank was forced to suspended any further issuance — including for its biggest ETNs and then on the majority of its ETN lineup — as it worked to resolve the issue.

This prevented any new cash from entering the products, and disrupted the mechanism that kept note prices in line with the value of their assets.

“Barclays is focused on a core set of products and services that match client interest and demand. We are firmly committed to building a leading position in global equity exchange-traded products, which are a strategically important part of our Equities and Global Markets businesses,” a spokesperson for Barclays said about the redemptions.

The bank didn’t provide comment on whether the closures were linked to the issuance error in its structured note and ETN business.

“I’m not terribly surprised that they’re closing a lot of these,” Bloomberg Intelligence analyst James Seyffart said. “ETNs have been broadly out of favor in the US for quite some time.”

The majority of the notes set to be redeemed are derivatives-based and track commodities. “Unfortunately, a bunch of these that are closing are the only ETPs available in the US to bet on specific commodity subindexes, like coffee or sugar or cotton,” Seyffart said.

ETNs are a close cousin of exchange-traded funds, often lumped in with their more-popular relatives. The key difference is that ETNs are unsecured debt obligations which are backed by the bank that issued them, rather than the assets the product is linked to. In many eyes, this adds extra risk.