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ARTICLE · 24 JULY 2020

Volatility-Linked Exchange Traded Products Disclosure Requirements – Recent Affirmation

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A court in the Southern District of New York recently dismissed a case brought by investors against Credit Suisse related to the VelocityShares Daily Inverse VIX Medium-Term Exchange Traded Notes...

United StatesFinance and Banking
Bradley Berman
Bradley Berman
Matthew Bisanz
Matthew Bisanz
J. Paul Forrester
J. Paul Forrester
Marla Matusic
Marla Matusic
Anna T. Pinedo
Anna T. Pinedo
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A court in the Southern District of New York recently dismissed a case brought by investors against Credit Suisse related to the VelocityShares Daily Inverse VIX Medium-Term Exchange Traded Notes ("ZIV ETNs") and the sufficiency of the disclosure in the ZIV ETN offering documents. While this case was specific to the ZIV ETNs, the opinion highlights the disclosure expectations regarding volatility-linked exchange traded products that issuers should consider (in addition to the FINRA guidance regarding sales of volatility products, which we have previously discussed here).

As a result of a spike in market volatility, Credit Suisse hedged its exposure as the issuer of the ZIV ETNs in the market using, among other thing, the same futures contracts used to determine the level of the S&P 500 MidTerm VIX Index, the index underlying the ZIV ETNs. As volatility continued to increase, this hedging activity contributed to the trading volume and adversely affected the market

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