The Securities and Exchange Commission is looking into the recent collapse of a volatility exchange traded note, VelocityShares Daily 2x VIX Short-Term ETN (NYSEArca: TVIX), according to reports Thursday.

The SEC is conducting a preliminary review of volatile trading in TVIX, which lost 60% of its value the past week and had about $700 million before the sell-off, The Wall Street Journal reports.

“Seemingly out of nowhere on March 22, the share price for the ETN went into a free fall, losing 29% on its way down to $10.20. That evening, Credit Suisse announced it would issue new shares of the ETN on a limited basis, raising eyebrows among traders who wondered if word of the move leaked out,” the newspaper reported. [TVIX Fallout Lingers for Volatility Products, ETNs]

Credit Suisse, the issuer for TVIX, temporarily suspended the creation of new shares last month. The ETN traded at a premium based on demand that surged as high as 90% last week before the dramatic pullback.

“The price swings in the VelocityShares ETN highlight the risk posed by disruptions in supply and demand of the notes. Because the notes are normally pegged to underlying assets such as stocks, bonds and indexes, sponsors can create or redeem shares to offset price distortions caused when investors buy and sell them,” Bloomberg News reported.

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