Barclays Expected to Replace Maturing VIX ETNs

In anticipation of the popular CBOE Volatility Index or VIX-related exchange traded notes maturing next year, Barclays, the underwriting bank behind the iPath ETN line, is expected to launch a pair of “Series B” ETNs to keep on the VIX exposure.

The iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) and iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca: VXZ) are scheduled to mature in January 30, 2019. However, ahead of the eventual maturation, Barclays is planning to launch the iPath Series B S&P 500 VIX Short-Term Futures ETNs (VXXB) and the iPath Series B S&P 500 VIX Mid-Term Futures ETNs (VXZB). No specific release date was provided.

Unlike exchange traded funds, ETNs are debt securities issued by financial institutions that promise to pay the return of an index, minus fees and taxes. The underwriting banks, like Barclays, will typically set an ETN to mature between 20 to 30 years after they are issued. Consequently, ETNs come with a defined date for closure.

In anticipation of the final redemption date for the maturing VXX and VXZ, both of the new proposed Series B VIX ETNs will trade in parallel with the old VIX ETNs until the final redemption date of January 30, 2019.

VXX and VXZ investors, though, do not need to take any action unless they want to. Investors of the maturing ETNs may opt to hold on to the investments until expiration or continue to buy and sell the maturing ETNs before the maturation date. Additionally, Barclays is making it easier for investors in the original ETNs to transition to the new Series B ETNs by lowering the minimum early redemption size to 25,000 shares as long as the investor is funneling the same amount into the new versions simultaneously.

The ETNs track the VIX, or so-called fear index, a widely observed indicator for investor sentiment in the stock market and measures the expected or implied volatility of large-cap stock options traded on the S&P 500 index. ETPs that track VIX futures allow investors to profit during rising volatility or hedge against short-term turns. VIX exchange traded products track the VIX futures market, not the VIX spot price.

For more information on the CBOE Volatility Index, visit our VIX category.