Inverse VIX ETN Shuts Down

February 06, 2018

One day after the Cboe Volatility Index (VIX) saw its largest one-day increase ever―115.6%―Credit Suisse announced it would be shuttering its popular inverse VIX ETN. The VelocityShares Daily Inverse VIX Short Term ETN (XIV), which had $1.9 billion in assets as recently as Friday, lost 96.3% of its value on Monday, prompting its issuer to redeem the notes early.

“Since the intraday indicative value of XIV on February 5, 2018 was equal to or less than 20% of the prior day’s closing indicative value, an acceleration event has occurred,” said a press release put out by issuer Credit Suisse.

XIV had a net asset value of $4.22 on Monday, down from $115.55 on Friday.

The ETN, which tracks a short position in VIX futures, will cease trading on Feb. 20. Investors can either sell the ETNs on the open market before that, or wait for Credit Suisse to redeem the notes.

The firm said that investors will receive a cash payment per ETN in an amount equal to the closing indicative value of XIV on the accelerated valuation date, which is Feb. 15. The payment will occur three business days later, on Feb. 21.

ETN accelerations, while uncommon, have happened in the past. In 2016, UBS initiated a mandatory redemption of the ETRACS 2X Monthly Leveraged Long Alerian MLP Infrastructure ETN (MLPL) following a steep decline in the value of the notes.

SVXY Unaffected

XIV wasn’t the only exchange-traded product hammered by Monday’s VIX spike. Its main competitor will continue to operate as normal, according to its issuer.

The ProShares Short VIX Short-Term Futures ETF (SVXY), which had $2.2 billion in assets last week, saw its net asset value decline by 96.1% on Monday. Despite the losses, ProShares said the ETF will continue to trade as normal.

SVXY’s performance on Monday “was consistent with its objective and reflected the changes in the level of its underlying index,” said a ProShares press release. “We expect the fund to be open for trading today and we intend to continue to manage the fund as usual.”

As of this writing, both XIV and SVXY were halted for trading, but were expected to resume trading later in the day.

Sumit Roy can be reached at [email protected]

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