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Displaying 10 out of 26 results for "ETN".

Material Misrepresentations in XIV's Prospectus Led to $700 Million in Losses

Executive Summary

Credit Suisse's XIV Exchange Traded Note (ETN) linked to the inverse of short-term VIX futures prices lost 97% of its value or approximately $2 billion in a single day on February 5, 2018. Credit Suisse announced the following morning that it would redeem all outstanding XIV shares at the Closing Indicative Value on February 15, 2018.1

Figure 1 reports the daily closing price for XIV from its inception in November 2010 to its demise in February 2018. The run-up in 2017...

This is Why Merrill Lynch Paid the SEC and FINRA $15 million over Bank of America's VOL Index-linked Structured Products.

The Securities and Exchange Commission yesterday announced a settlement with Merrill Lynch over structured products linked to Bank of America's proprietary investable volatility index based on VIX Future contracts ("VOL Index"). The SEC press release announcing the settlement and its Order Instituting Proceedings are available on the SEC website. The companion FINRA settlement press releaseand AWC are available on the FINRA website. Bank of America published its VOL Index in 2010 and shortly...

More Impossible Trade Prices Caused by Auto-liquidators: Option Combinations

In three previous blog posts, we documented how auto-liquidators execute option trades at distorted prices to their clients' detriment. The price distortions are caused by the price impact of large sell or buy orders on thinly traded securities. These distortions were reversed within minutes, but not before causing investors millions of dollars of unnecessary losses.

In "The Recent Market Turmoil Spells Trouble for Auto-liquidators like Interactive Brokers", we showed that thinly traded...

Only a Faulty Auto-liquidator Pays More for An Option Than it Can Ever Be Worth

In two previous blog posts we documented how auto-liquidators appear to have executed option trades at distorted prices to their clients' detriment on August 24, 2015. The price distortions were caused by massive sell or buy orders on thinly traded securities being dumped into the market by auto-liquidation programs. These distortions were reversed within minutes, but not before causing investors millions of dollars of unnecessary losses.

In "The Recent Market Turmoil Spells Trouble for...

More Signs of Trouble for Auto Liquidators

In "The Recent Market Turmoil Spells Trouble for Auto Liquidators Like Interactive Brokers" we wrote about how the market decline on August 24, 2015 revealed continuing problems at auto-liquidating brokerage firms that cater to active traders. These active traders' accounts typically are subject to "portfolio margin" requirements which we have written about at length. 1

We showed that thinly traded long-dated, deep out-of-the money SPX put options were bought on August 24, 2015 at...

SEC Scrutinizing Exchange Traded Notes is reporting that the Office of Capital Markets Trends of the Securities and Exchange Commission (SEC) is looking into the details of exchange traded notes (ETNs). The office, headed by Amy Starr, is looking into the fees and the disclosure of risks and formulas used to determine ETN indicative values according to statements made by Starr at the Structured Products conference in Washington, DC on December 10.

ETNs have been a frequent subject on the blog and regulators have issued...

Options Strategies Embedded in Exchanged Traded Products

In theory, exchange traded products (ETPs) can be linked to almost any underlying asset, including derivatives. While many ETPs are linked to portfolios of bonds or stocks, some are linked to portfolios of futures contracts, which we have discussed at length before. Bill Luby at VIX and More has written a couple posts on ETPs that are linked to portfolios of options, which are gaining some traction with investors. As usual, we greatly enjoyed Bill's posts and thought we'd explain some of the...

Persistence and Mean Reversion in VIX Rolling Futures Indexes

In our last post we followed up on Jason Voss's discussion of the Hurst exponent as a measure of persistence or mean reversion in market data. We compared the Hurst exponents of the S&P 500 to that of the VIX index, and found that the S&P 500 is largely a random signal (Hurst exponent near 0.5) but that the VIX exhibits characteristics of a 'switching' or mean reverting signal (a Hurst exponent between 0 and 0.5).

Much has been made of VIX mean reversion in the financial blogosphere. One idea...

ETP Turnover in 2012

2012 was a busy year for the exchange-traded product (ETP) market. As we've noted before, many new funds have been created, and many others have been closed and liquidated. The analysts at IndexUniverse have been keeping track, and have produced the final year-end tally for 2012.

In all, 178 ETFs or ETNs were launched in 2012. iShares (BlackRock) was the largest issuer in terms of number of new funds, but the market was highly divided such that 44% of funds were launched by the smallest 26...

Copper ETP Market Review

Last week we described how a physical copper ETF might lead to a copper shortage and disruption of world commodities markets. This week we wanted to review the copper ETP market in a bit more detail to get an idea of what is currently being offered.

There are seven US ETPs available with exposure primarily to the copper market. These include:

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