Credit Suisse is pulling the plug on an investment product that just got wiped out with the stock market’s drop

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REUTERS/Ruben Sprich

  • Credit Suisse is pulling the plug on the VelocityShares Daily Inverse VIX Short-Term ETN, or XIV, which had bet on lower volatility.
  • The exchange-traded note was popular last year amid the market’s unprecedented calm.
  • Credit Suisse is the largest investor in the XIV.

With volatility storming back into the market, Credit Suisse is pulling the plug on a popular investment product that had bet on inactivity.

The bank said Tuesday that it saw an “irrevocable call notice” on the VelocityShares Daily Inverse VIX Short-Term ETN, or XIV, in which it was the largest investor.

The exchange-traded note is designed to return the inverse performance of CBOE’s volatility index, or VIX, which saw its largest increase on record Monday amid a 4% plunge in stocks.

The VIX reflects traders’ expectations for rough patches in the stock market, and usually trades in the opposite direction to the S&P 500. As stocks surged to new highs last year, the VIX fell to record lows, benefitting the products designed to rise when it falls.

In its notice, Credit Suisse said it will no longer issue new units of the exchange-traded notes, and expects that its last day of trading for XIV will be on February 20. The following day, investors will get a cash payment per ETN equal to XIV’s value, Credit Suisse said.

On Monday, the XIV, along with the ProShares Short VIX Short-Term Futures ETF (SVXY) wiped out nearly $3 billion, according to Macro Risk Advisors. Both had profited from the market’s calm in 2017.