If the IRS follows the same rule for event-type CVRs, the issuer recognizes no gain or loss on the CVR issuance, the repurchase of the CVR, or the lapse of the CVR, but a target shareholder generally must recognize an immediate capital gain or loss taking into consideration the fair market value of the CVRs received on the date of distribution.

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Hong Kong spent heavily to promote the issue and also offered such goodies as a 5% discount to the market value of the stocks in the ETF at the ipo (so investors got, in effect, an immediate 5% gain).

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While traditionally one would trade bonds to make such bets, by entering into either side of an interest rate swap agreement, you would gain immediate exposure to interest rate movements with virtually no initial cash outlay.

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