Holy cow! Index Universe – self-described defenders of the ETF industry — have admitted there may be an issue with these products affecting the underlying assets, after all.
The case in point is the TVIX ETN, which started behaving oddly (ballooning in size) at the beginning of February. Note our stories about the matter here and here.
Here, meanwhile, is the sudden dose of reality that’s finally hit Index Universe (H/T Kid Dynamite):
A quick back-of-the-envelope calculation yields a pretty interesting set of numbers. As an industry, ETF issuers are net long over $1.5 billion of front-month exposure, and over $600 million of second-month exposure. Since we’re constantly defending the ETF industry as being “too small to be a systemic threat,” we initially assumed this was no big deal. But then we ran the numbers on the actual open interest in VIX futures...MORE
Holy cow (Bangalore)