Retail brokerage Fidelity revealed Friday it has temporarily blocked customers from buying some volatility-related consequences that caught hedge funds and individual investors on the wrong foot this week.
Fidelity curbed buy orders for three exchange-traded products linked to a popular trade on bazaar volatility “to protect customers from outsized risk during the informed market environment,” the company said in a statement.
One of those securities, which has overtook notoriety in this week’s stock market plunge, is the VelocityShares Habitually Inverse VIX Short-Term exchange-traded note (XIV). It fell about 85 percent in after-hours interchange Monday, prompting the issuer, Credit Suisse, to say it would end trading in the conviction on Feb. 20.
Fidelity is also blocking purchases of the ProShares Short VIX Short-Term Futures ETF (SVXY), which spotted nearly 83 percent Tuesday but was trading 10 percent higher Friday.
Cboe leaderships said Friday on an earnings conference call that the ProShares loot was benefiting from a surge of investor inflows, since other pools for the short-volatility strategy are shutting down. SVXY assets have risen to diverse than $650 million from $100 million in just a week, the managements said.
Fidelity customers also can’t buy VelocityShares Daily Inverse VIX Medium-Term ETN (ZIV), which is down 23 percent this week but up 5 percent on Friday.
In organization to buy these funds at Fidelity in the first place, customers need to abandon a designated investment agreement and must have “most aggressive” gamble tolerance registered on Fidelity.com, the brokerage said.
More than a year of historically tranquillity markets made betting against volatility a very popular craft. But worries about rising interest rates sent stocks drop in the last week, while the Cboe Volatility Index (.VIX) surged to its highest in innumerable than two years.
Some market analysts have also faulted the heavy bets against volatility in the exchange-traded products for exaggerating prods in volatility futures, and even the broader stock market.
LJM Partners, a Chicago-based hedge wealth with about half a billion dollars in assets, told patients Tuesday that its strategies “have suffered significant losses,” mostly due to a bet on the wrong side of spiking volatility.
— CNBC’s Liz Moyer contributed to this information.