VelocityShares Daily 2x VIX ST ETN (TVIX)

[eric4x]

Interesting article on volatility ETFs and VIX futures.*

By Dave Nadig and Gene Koyfman

http://www.indexuniverse.com/hot-topics/11183-volatility-etfs-often-own-all-vix-futures.html?fullart=1&start=4

Quoting from the article:

"Since we’re constantly defending the ETF industry as being “too small to be a systemic threat,” we initially assumed this was no big deal. But then we ran the numbers on the actual open interest in VIX futures:"*

"To be honest, our initial reaction here was “holy cow!” "*

"Why is this a problem? Because it’s entirely game-able."*

"They can bid up the price of the second-month futures constantly, and depress the price of the front month the closer it gets to expiration. This creates a kind of inexorable contango maelstrom, which is brutal for long-holders of the ETFs."*

"So how does this all tie back to Credit Suisse? Well, looking back at the past month, ask yourself this question: Would you want to be the only buyer in one of the most volatile markets in the world? So, is it any wonder Credit Suisse called “uncle” and decided to stop taking new money?"*