Effective
May 2nd, VXXB and VXZB, Barclays’ short- and medium-term volatility funds
will be renamed to VXX and VXZ. This is
a market maneuver by Barclays to recapture the brand value of the original,
very successful, VXX and moderately successful VXB products introduced in 2009. The original products matured in January 2019
so Barclays had to create VXXB and VXZB as replacement products. However, there’s
nothing to prevent tickers from being reused so Barclays
acted after only three months to recapture the brand value of these retired
tickers.
On May 2nd,
2019 the tickers will be named as well as all of their associated options.
While very
similar, these products are not identical to the original VXX & VXZ products. Specifically:
- An “Issuer Call” feature has been
added which formalizes Barclays’ right to shutdown these funds at any time if
they wish. In this situation shareholders
will receive cash in exchange for their shares using a formal termination value
tied to the underlying VIX future prices. - These funds will not be covered under
the Option Clearing Corporation (OCC) Portfolio Margin program. My understanding is that this is because of
an agreement to not include any Exchange Traded Notes (ETNs) in the program
that were created after a certain date. Presumably this is because of the perceived
higher credit
risk associated with ETNs. This portfolio margin program is of interest to
institutional traders and retail traders wanting to use an integrated margin
calculation for their accounts
For more on these issues and the price history of the original
VXX see Goodbye
VXX, Hello VXXB
For details on how VXX and VXXB work see How Does VXX/VXXB Work
