RMB Oil Exchange Traded Notes
RMB Oil Index Exchange Traded Note
RMB ETNs are listed debt securities issued by FirstRand Bank Limited. An RMB ETN allows individual investors to buy an obligation, similar to a forward contract, which is traded on the Johannesburg Stock Exchange (JSE) in the same manner as a listed security. Investors can trade RMB ETNs on the JSE at market price, or receive a cash payment at maturity or early redemption. The RMB Oil ETN offers investors a cost effective and convenient way to take a long-term or short-term view on the performance of crude oil. The RMB Oil ETN references the RMB Oil Index and the performance of the WTI crude oil futures contract, traded on the New York Mercantile Exchange. It also references the US Treasury Bill rate of interest and the daily spot USD / ZAR exchange rate. This note will provide its investors with the opportunity to gain exposure to the performance of international crude benchmarks via an inward listed Rand denominated investment.
The RMB Oil ETN is the first product to be launched on the RMB ETN platform. It is based on the RMB Oil Index which is calculated and published daily and references:
- The WTI crude oil front month futures contract traded on the NYMEX
- The performance includes the change in the price of the futures contracts - the “roll yield” (positive or negative) due to rolling over contracts from one month to another
- Interest is returned on the full investment amount at US T-Bill rates
- The index deducts a flat investor fee of 75 basis points
- The index is translated into ZAR daily using the 4pm USD/ZAR rate
One ETN unit gives exposure to one barrel of oil. The RMB Oil ETN has a term of 5 years.
Benefits of trading and investing in RMB ETNs include:
- Access to new markets and strategies, allowing investors to diversify their portfolios
- Cost-efficiency
- Liquidity can be bought or sold at any point in time during normal JSE trading hours - RMB is the market maker of the RMB ETNs
- Exposure to a portfolio of products through a single investment
- Convenience of trading a share - without the complications of trading futures or physical commodities
- Transparent exposure to an index that is calculated and published daily
Risks of trading and investing in RMB ETNs include:
- Investing in RMB ETNs may result in a loss for the investor
- RMB ETNs are exposed to the credit risk of FirstRand Bank Limited
- RMB ETNs could encompass potentially unprofitable trading strategies
The risks identified above are not exhaustive. You should also review carefully the related “Risk Factors” section of the programme of the product, available on the RMB website www.rmb.co.za.
