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Seriously? Credit Suisse to Allow New TVIX Creations (TVIX, CS)

March 22, 2012 8:35 pm
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Seriously? Credit Suisse to Allow New TVIX Creations (TVIX, CS)

Credit Suisse to Allow New TVIX Creations (TVIX, CS)

Credit Suisse (NYSE: CS), the Swiss banking giant that sponsors the controversial and now infamous VelocityShares Daily 2x Long VIX Short-Term ETN (NYSE: TVIX) said it plans to reopen issuance of TVIX shares on a “limited basis” following a 29.3% plunge in the ETN on Thursday. That decline was caused in part by the bank temporarily halting new issuance of TVIX shares last month.

“Beginning March 23, 2012, Credit Suisse may from time to time issue the ETNs into inventory of its affiliates to make the ETNs available for lending at or about rates that prevailed prior to the temporary suspension of issuances of the ETNs. Also, beginning as soon as March 28, 2012, Credit Suisse may issue additional ETNs from time to time to be sold solely to authorized market makers,” according to a statement issued by the bank after the close of U.S. markets.

As Benzinga reported on Thursday the halt in TVIX share creations may have caused a massive spike in the ETN’s net asset value. The elevated NAV and ensuing plunge in TVIX indicates that, simply put, traders discovered said premium and exploited it.

TVIX’s slide continued in after-hours trading where the ETN lost almost another 12% and was found at $9 at 8:30PM Eastern Time. That’s by far the the lowest price TVIX has ever traded at.

Worse yet, even at $9, TVIX is still well above its closing indicative value of $7.83 as listed on the VelocityShares Web site.

For its part, Credit Suisse was cautious in its assessment of how new TVIX creations may impact the ETN’s price.

“As disclosed in the pricing supplement relating to the ETNs under the heading “Risk Factors—The Market Price of Your ETNs May Be Influenced By Many Unpredictable Factors,” the market value of the ETNs may be influenced by, among other things, the levels of supply and demand for the ETNs. It is possible that the reopening of the ETNs on a limited basis, as described above, may influence the market value of the ETNs. Credit Suisse cannot predict with certainty what impact, if any, the reopening described above will have on the public trading price of the ETNs,” the bank said in its statement.

Not exactly a ringing endorsement to buy TVIX, is it?

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