Thursday, April 28, 2022

The Latest on VXX and Additional Creation Unit Suspensions by Barclays

It has been 1 ½ months since Barclays announced the suspension of new creation units in the popular iPath Series B S&P 500® VIX Short-Term Futures ETN (VXX).  Today, we received some additional information from Barclays in conjunction with their earnings report. 

In a press release today, Barclays announced that it has suspended new creation units in an 31 Barclays iPath ETNs in addition to the VXX and OIL creation unit suspensions from March 14th.  The full list of ETNs with suspended creation units, sorted by average volume, can be found here, with a top five consisting of VXX, DJP, OIL, GRN and JJN.

Barclays provided some context for what is going on behind the scenes:

“Barclays PLC announced today that Barclays Bank plans to restate the financial statements included in its Annual Report on Form 20-F for the year ended December 31, 2021 (the “Form 20-F”) filed with the Securities and Exchange Commission (the “SEC”) and to amend the Form 20-F to reflect such restatement and to change its conclusions with respect to the effectiveness of its internal control over financial reporting and disclosure controls and procedures.  Because the registration statement and prospectus under which Barclays Bank makes sales of each series of ETNs incorporates by reference the Form 20-F, Barclays Bank and its affiliates cannot continue to make sales under such registration statement and prospectus until the restatement is completed and Barclays Bank files an amended Form 20-F and a new shelf registration statement. Barclays Bank expects to reopen sales of the ETNs when the amended Form 20-F and new shelf registration statement have been filed with the SEC and will make a further public announcement when this action is taken.”

In a nutshell, we are now going to have to wait until we have an earnings restatement for FY 2021 – and the timetable for that is highly uncertain.

In today’s Barclays PLC Q1 2022 Results Announcement release, the company discusses the matter in more detail in the notes section on (original numbering) pp. 29-31 and highlights the following:

“Barclays remains committed to its structured products business in the US and expects BBPLC to file a new shelf registration statement with the SEC as soon as practicable following the amendment of the BBPLC 2021 Form 20-F. For further details, please refer to the notes to the condensed consolidated financial statements accompanying this Q122 results announcement.”

This likely means that Barclays has no intention of shutting down VXX and accelerating the termination at the indicative value price.  That said, the earnings restatement hurdle does not seem like a quick fix, so…both longs and shorts have significant risks (see Further Reading links below for more details) with the VXX premium to its intraday indicative value (IV) (VXX.IV) currently at 13.6%.

Further Reading:
VXX Premium to Indicative Value Falls Slightly to 26%
VXX Upside vs. Downside Risk with No New Creation Units
Barclays Suspends Creation Units for VXX
Attempt at TVIX Short Squeeze Fizzling Out
The Resurrection of TVIX
TVIX Premium to Indicative Value Creeping Back Up
TVIX Creation Units Return; What It Means for Investors
Is TVIX Now Just a More Docile UVXY?
Recent TVIX Volume and VIX Futures Volume
The Story of VIX ETPs Relative to their Intraday Indicative Values
The Ups and Downs of the New Premium in TVIX
Credit Suisse Suspends Creation Units in TVIX: What it Means
Four Key Drivers of the Price of TVIX
Will TVIX Go to Zero?
Who Is Trading TVIX?
Volatility Becomes Unhinged on Friday
TVIX Finally Getting Its Due As Day Trading Rocket Fuel
All About UVXY

For those who may be interested, you can always follow me on Twitter at @VIXandMore

Disclosure(s): net short VXX at time of writing

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