Credit Suisse to close ‘inverse volatility’ ETN after price plunge
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- Credit Suisse will forcibly redeem all holdings in an ‘inverse volatility’ exchange-traded product that it issued, and close the fund following an abrupt surge in volatility that caused its price to collapse. The Swiss bank said that it will activate an “irrevocable call notice” on the VelocityShares Daily Inverse VIX Short Term exchange-traded note, more frequently cited by its ticker symbol XIV. XIV allowed traders and investors to ‘short’ volatility, meaning bet that it will fall.
- The ETN was suspended for trade on the Nasdaq Stock Market early in the New York morning, leading investors to speculate on its future. Its price had collapsed to about $10, from $99 on Monday, according to Bloomberg data.
- Credit Suisse said that it will send the redemption notice “no later” than February 15. The so-called “acceleration” event, in which investors will receive cash for each ETN unit, will be February 21. Separately, ProShares said its Short VIX Short-Term Futures exchange-traded fund (SVXY), a similar product, would remain open. Its shares were suspended on the NYSE Arca exchange, prompting questions as well about its future. ProShares said that the performance on Monday was “consistent with its objective and reflected the changes in the level of its underlying index.