Analysis: Out Of Control? Volatility ETN Triggers Risk Concerns

February 24, 2012

Trading volume rocketed over the past two weeks for VIX-tracking futures exchange-traded products and highlight problems complex exchanged traded products can fall victim to, according to an article on Reuters.

The article highlights the recent halting of creations on the VelocityShares Daily 2x VIX Short-Term ETN (NYSEArca: TVIX). The ETN's issuer, Credit Suisse, feared increased demand would negatively affect the price of VIX futures, the article said.

The situation with TVIX is reminiscent of what happened to the United States Natural Gas Fund (NYSEArca: UNG) in 2009. UNG stopped issuing new shares then, afraid of the effect the ETF could might have on the commodity, Reuters said in the article.

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