While the issuance halt initially triggered outsize moves for VXX -- including a 45% jump then reversal in a single session -- the ETN has been calmer as volatility across U.S. stocks retreated, helping prevent a potentially vicious short squeeze in the product. 

All the same, since new cash can’t be added to either note the distortions can be significant. VXX closed at a record 24% premium on Friday, according to data compiled by Bloomberg. OIL has swung between a premium and discount amid major moves in the crude market in the past two weeks. It closed Friday at a 1.1% discount to assets.  

VXX gained 2.4% in early trading as of 9:02 a.m. in New York. OIL was 3.2% lower.

“This is a rare case of an exchange-traded product issuer dropping the ball and mismanaging their products,” said Todd Rosenbluth, head of research at ETF Trends. “Although it is no more likely to occur again this is another red flag for trading ETNs and not ETFs.”

Eoin Treacy's view

ETNs were created to offer exposure to portions of the market that are difficult for ETFs to access. This comes with additional counterparty risk. The times when ETN products go awry is generally when there is significant credit market volatility like we have seen recently.

The rebound in stocks over the last few weeks saved Barclays from an even more embarrassing situation but the trading hiatus for these products is certainly not confidence inducing. Barclays pulled back violently following Russia’s invasion of Ukraine and has now encountered resistance in the region of the 200-day and 1000-day MAs. It will need to hold the low near 150p if support building is to be given the benefit of the doubt.

The VIX Index has collapsed over the last few weeks and is now testing its short-term sequence of higher reaction lows. A clear upward dynamic would be required to signal a return to demand dominance.

As noted last week, crude oil’s backwardation is no longer trending higher. That’s suggests the short-term demand driver is ebbing. Today’s downward dynamic confirms a lower high. A sustained move back above $120 will be required to question scope for a retest of the lows near $100. China’s demand outlook, as lockdowns spread in line with rising COVID infections, is likely to be a significant factor in how well crude oil holds its gains.