New Volatility ETN In Demand

January 31, 2019

It may not have been a seamless transition, but the handing of the volatility baton from the iPath S&P 500 Short-Term Futures ETN (VXX) to the iPath Series B S&P 500 VIX Short Term Futures ETN (VXXB) was pretty successful by any measure.

As we wrote about earlier this week, after 10 years on the market, VXX had its last trading day on Tuesday, and matured on Wednesday. The exchange-traded note is no more, and anyone still holding it on Wednesday was given a lump sum payment based on VXX’s net asset value at Tuesday’s close.

As it turns out, a whole lot of people got that payment, judging by the hundreds of millions of dollars that was left in VXX on Tuesday. Assets under management totaled almost $450 million on the final trading day, down from the $915 million in AUM the product averaged over 2018, but still a sizable sum.

Either a bunch of investors didn’t get the memo that VXX was maturing, or they didn’t care. Either way, they were fine—holders got paid on Wednesday.

The Switch

Of course, not everyone stayed with VXX until its last dying breath. Many swapped into VXXB, a nearly identical product from the same issuer.

Assets in the replacement jumped to an all-time high of $520 million on Wednesday, more than double where they were a month ago.

 

AUM In VXX (Blue) & VXXB (Orange)

Source: Bloomberg
 

Volume in the new ETP picked up too. On Wednesday, 21 million shares of VXXB traded hands, half of VXX’s average volume in 2018 and equal to VXX’s average volume in 2017.

 

Volume In VXX (Blue) & VXXB (Orange)


Source: Bloomberg

 

It’s no wonder VXXB has smoothly transitioned to being the No. 1 volatility product on the market. The ETP has all of the characteristics that made its predecessor so popular. It’s issued by Barclays, has an 0.89% expense ratio, and most importantly, tracks the same S&P 500 VIX Short-Term Futures Index.

One new aspect is that VXXB trades on the Cboe, parent company of ETF.com, but that should have no impact on how the product works.

Email Sumit Roy at [email protected] or follow him on Twitter sumitroy2

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