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Alternative Market Briefing

Several regulators are enquiring Credit Suisse ETN’s sudden plunge

Thursday, April 05, 2012

Benedicte Gravrand, Opalesque Geneva: FINRA, the Securities and Exchange Commission (SEC) and Massachusetts’s regulator are investigating Credit Suisse, the global private and investment bank headquartered in Zurich, about exchange-traded notes (ETN) that it re-issued last month.

Massachusetts's William Galvin asked Credit Suisse on March 23 for information on all purchases of the Credit Suisse-managed VelocityShares 2x Long VIX Short Term Exchange note (TVIX) from Feb. 20 to March 23, and said he wants to know why the bank re-issued the ETN on March 23. Credit Suisse has until April 5 to provide the information.

Indeed, on March 22, 2012, Credit Suisse announced its plans to reopen issuance of the TVIX on a limited basis. The bank had temporarily suspended further issuance of these ETNs on February 21 due to internal limits on the size of the ETNs. "At present, the ETNs are trading at a premium to their indicative value," said the announcement. Although apparently, the notes had began dropping on March 20, after having climbed to 134% more than its index during the previous three weeks.

The note, which is designed to track stock-market volatility, plunged that week, even though market volatility was little changed, Dow Jones ......................

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