A Midwestern Prop Trading Shop Enters the ETF Biz
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Thursday, January 13, 2022

A Midwestern Prop Trading Shop Enters the ETF Biz

A Midwestern proprietary trading shop is entering the ETF business.

Today, Amnon Baavoz, chief investment officer and co-founder of Dynamic Shares LLC, and Mark Downing, chief product officer, unveil Dynamic's first ETF: the Dynamic Short Short-Term Volatility ETF (WEIX on the NYSE Arca), the first series of the Dynamic Shares Trust. Dynamic is an affiliate of Chicago-based Arb Trading Group; Baazov and his fellow Dynamic co-founder, principal Adam Passaglia, are both managing partners and principals of Arb, while Downing is Arb's chief operating officer.

In contrast with some ETFs, which are mutual funds and thus regulated by the SEC and managed by asset managers that are RIAs, Dynamic's new fund is a commodity pool, regulated by the CFTC, and Dynamic is the fund's sponsor and commodity pool operator. Weixuan Zhang, principal of Dynamic Shares, serves as the fund's trading principal and handles day-to-day portfolio management.

The fund comes with an expense ratio of 185 basis points and is actively managed per a proprietary algorithm.

"Using the skills and technologies we have honed in our proprietary trading firm, we aim to efficiently harvest the volatility premium that exists in the marketplace using a mathematical and systematic approach to shorting volatility," Baazov states.

Baazov and Downing put the launch in the context of concerns over current equity market valuations and bond yields.

"We believe investors are looking for investment alternatives with low correlation to equity indices that also have the potential for attractive returns and capital preservation in highly volatile markets," Downing states.4

Other service providers to the new fund include: BMO Harris Bank N.A. as custodian; Capital Investment Group, Inc. (CIG) as distributor; the Nottingham Company as administrator and fund accountant; Nottingham Shareholder Services, LLC as transfer agent; Virtu Americas LLC as initial authorized participant; Wedbush Futures as futures commission merchant; and Wilmington Trust, National Association as trustee.

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