Van Eck, Merrill Let Investors Trade HOLDRs for ETFs

The new ETFs are expected to retain the corresponding HOLDRS’ ticker symbols and should launch early in the fourth quarter of 2011.

“We believe ETFs offer significant advantages over HOLDRS in their ability to evolve with a dynamic underlying index; this in turn leads to enhanced diversification and broader-based representation of a market or industry segment,” said Adam Phillips, managing director of ETFs at Van Eck, in a statement. “We are pleased to have been chosen by Merrill Lynch to partner with them in this important transaction.”

Van Eck believes ETFs offer a more dynamic investment vehicle than HOLDRS “since ETFs are better able to reflect changes in the composition of industry sectors that inevitably occur over time.”

HOLDRS were first introduced in 1999 to give investors the chance to gain broad exposure to certain sectors through a single market-traded security. Because they use a depositary trust structure, their initial portfolio of securities generally remains static over time. ETFs, in comparison, can be rebalanced periodically and used to track an underlying index.

The underlying indices for the new Market Vectors ETFs aim to represent the most liquid stocks within that particular industry. The top 25 constituents based on full market cap and three-month average daily trading volume are included in each index.

The indices include companies that generate at least 50% of their revenues from the relevant industry; individual company weightings are capped at 20%. The indices will be reviewed semi-annually, with weighting caps applied quarterly, according to Van Eck. Index information, including daily constituents, can be found online.