As doubts grow over a Halliburton (NYSE: HAL) and Baker Huges (NYSE: BHI) deal, a merger-related exchange traded fund could capitalize off the widening arbitrage opportunity.

The second largest holding in the Index IQ Merger Arbitrage ETF (NYSEArca: MNA) is BHI at 7.3% of the underlying portfolio.

The oil services space has been bubbling with a major M&A deal after Halliburton announced a buyout deal of rival Baker Hughes for $34.6 billion back in mid-November 2014.

However, as the two oil services giants began talks, many were wary of potential antitrust issues, given the level of the consolidation, New York Times reported.

The two companies are the second and third largest in the oil services space, and the merger would have helped the new firm better compete against the much larger Schlumberger (NYSE: SLB). For instance, the top holdings in the Market Vectors Oil Service ETF (NYSEArca: OIH) include SLB 20.9%, HAL 12.7% and BHI 8.2%.

As the merger deal keeps dragging on, growing doubts over regulatory red-tape may have created a high-reward opportunity for risk-tolerant investors, Reuters reports.

Subscribe to our free daily newsletters!