Trading in Volatility ETFs Halted at Fidelity

Trading in Volatility ETFs Halted at Fidelity

Trading in Volatility ETFs Halted at Fidelity


Just 3 days after the collapse of an exchange-traded note betting on low volatility, Fidelity Investments said it moved to protect client/investors from these highly leveraged products.

The fund giant is halting customer purchases of 3 volatility-focused ETFs (exchange traded funds) a company spokesman, said in an e-Mail last Friday

They are: ProShares Short VIX Short-Term Futures (SVXY), VelocityShares Daily Inverse VIX Short-Term ETN (XIV), and the VelocityShares Daily Inverse VIX Medium Term ETN (ZIV).

The ban started on 6 February, but the firm did not issue the news publicly until Friday. “We are allowing customers to sell out of existing positions,” he said.

Representatives for TD Ameritrade Holding Corp. and Charles Schwab Corp. said Friday that customers can still trade SVXY. Ameritrade is holding a 100% margin requirement for those purchases.

Other brokerage firms including E-Trade have moved to protect customers as global markets have plunged and volatility has surged. The fallout from the collapse of a vast array of poorly understood arcane bets Vs stock-market volatility mounted last week.

Credit Suisse Group AG moved to liquidate 1 investment product and more than a 12 others were halted after their values sunk to Zero.

SVXY is down 91% since last Friday a week, XIV plunged 96% and ZIV fell 27%.

The FT earlier reported on the Fidelity’s decision.

Fidelity said customers who want to buy funds that borrow money to increase their returns must sign an agreement that lays out the risks of the products and acknowledge that they have a “most aggressive” risk tolerance.

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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