A spokeswoman for the Financial Industry Regulatory Authority said Thursday the regulator is "looking at the events and trading" activity surrounding a sharp plunge in the price of an exchange-traded note designed to track stock market volatility.
FINRA began its inquiry after the Credit Suisse-managed VelocityShares Daily 2x Short-Term exchange-traded note, or ETN, lost half its value in just two days earlier this month.
But FINRA's review is not limited to the volatility ETN, the spokeswoman said. "We have a review underway looking at a host of issues relating to ETNs and other complex products," the spokeswoman said.
Exchange-traded notes are debt securities issued by banks and were first brought to market in 2006 as a way for sophisticated traders to make bets on different parts of the market.
But recently, retail investors have begun trading ETNs as one way to get exposure to popular sectors of the market like silver, gold and natural gas.
To be sure, the dollar value of ETNs is small, roughly $18 billion. The volatility ETN managed by Credit Suisse, for instance, had about $700 million in assets at its peak. By contrast, the dollar value of better-known exchange-traded funds, or ETFs, is $1.2 trillion.
