XIV
From Invertopedia, the encyclopedia of how things fail
XIV was an exchange-traded note issued by Credit Suisse that rose when the stock market was calm and fell when it was volatile[3]. On February 5, 2018 the Cboe Volatility Index had its biggest one-day jump on record, and XIV's indicative value fell from $108.37 at the previous close to $4.22, a loss of more than 96%[1][3][4]. Credit Suisse declared an acceleration event the next morning and paid holders $5.99 a note on February 21[1][3]. Investors who say they lost about $1.8 billion are still suing[3][5].
Contents
The bet
XIV tracked the inverse of an index of short-term VIX futures, so it gained when traders expected the market to stay quiet[3]. From 2010 to 2018 that is mostly what happened, and the notes climbed[3]. Credit Suisse issued 9 million notes in 2010, 5 million in 2017 and another 16.3 million on January 29, 2018[6].
Holders believed calm was the normal state of things and that the occasional spike would pass. The notes had dropped sharply three times before, in 2011, 2015 and 2016, and recovered each time[3].
What happened
| 2010 | Credit Suisse issues the first 9,018,880 XIV notes.[6] |
|---|---|
| 2011, 2015, 2016 | Three volatility spikes knock the notes down. Each time they recover.[3] |
| Jan 29, 2018 | Credit Suisse issues 16,275,000 more notes. In the following week they sell for as much as $135 each.[3][6] |
| Feb 2, 2018 | XIV's closing indicative value is $108.37.[1] |
| Feb 5, 2018, 4:00 p.m. ET | The S&P 500 falls 4.1% and the VIX rises 115.6%, its biggest one-day jump on record. XIV's indicative value ends regular trading at $72.59.[3][4] |
| Feb 5, 2018, after the close | VIX futures keep rising. By 4:15 p.m. the notes are worth just over $4, and at 5:09 p.m. Nasdaq publishes an indicative value of $4.22.[3] |
| Feb 6, 2018 | Credit Suisse says an acceleration event has occurred because the value fell to 20% or less of the prior close, and stops issuing notes. XIV closes the day down 93%.[1][2] |
| Feb 15, 2018 | Last day of trading after Nasdaq suspends the notes, and the day their final value is set.[7] |
| Feb 21, 2018 | Credit Suisse terminates the notes and pays $5.99 each.[3] |
| Apr 27, 2021 | A federal appeals court revives investors' claims that Credit Suisse manipulated the collapse.[3] |
The kill shot
XIV was a bet that volatility would stay low, with a trapdoor written into the terms. One big spike in a day was enough to wipe it out, and it did.
The prospectus said it plainly. If the underlying futures rose more than 80% in a day, the notes would very likely fall to 20% or less of the prior day's value and could be accelerated[2]. On February 5, 2018 the VIX itself more than doubled[4], and the notes fell through that line within minutes of the close[3].
The investors' lawsuit says the fall was made worse. According to their complaint, as summarized by the appeals court, Credit Suisse bought more than 105,000 VIX futures in the 15 minutes after the close to hedge its own exposure, about a quarter of the market, which pushed futures prices up and XIV down[3]. The complaint also says the published value froze at about $24 to $27 for an hour while the notes were really worth about $4, and that investors bought more than $700 million of them in that hour[3]. These are allegations; the case has not been decided[3][5].
Red flags ignored
- Steady gains from selling insurance. The notes rose for years because nothing bad happened, and fell hard every time something did.[3]
- The off switch was in the terms. The prospectus said an 80% one-day rise in the futures would very likely end the notes.[2]
- Three warning shots. Spikes in 2011, 2015 and 2016 had already shown how fast the notes could fall.[3]
- More notes, sold late. Credit Suisse issued more than 16 million new notes one week before the crash.[6]
The cost
About 15 million notes were outstanding on February 5, 2018[3]. They had been worth $108.37 each at the February 2 close and were paid out at $5.99[1][3]. The investors' complaint puts their losses at about $1.8 billion[3].
The plaintiffs estimate that Credit Suisse made $475 million to $542 million when it redeemed the notes[3]. Credit Suisse said at the time that the drop would have no "material impact" on the bank[2].
The inversion
Steady small wins from selling insurance are not income. They are the premium on a disaster, so read the clause that ends the product before you buy it, and size the bet for the day it triggers.
What survived
A similar fund. ProShares kept its Short VIX Short-Term Futures ETF (SVXY) running after it fell 83% on February 6, 2018[2][4].
The lawsuit. The investors' case was dismissed in 2019 and revived on appeal in 2021[3][5]. In February 2025 the court certified a class for the manipulation claims and refused one for the misrepresentation claims, and a third amended complaint was filed in March 2026[5][6].
References
- ^ “Credit Suisse AG Announces the Event Acceleration of its XIV ETNs”. Credit Suisse AG, Form 6-K exhibit filed with the SEC, February 6, 2018. The product's full name, the acceleration event (value at or below 20% of the prior close), the end of new issuance, the timetable, and the $108.3681 closing indicative value on February 2, 2018.
- ^ “Credit Suisse says it will end trading in the volatility security that's become the focus of this sell-off”. CNBC, February 6, 2018. The 93% fall on February 6, $1.9 billion in assets, the prospectus language on an 80% rise, the "material impact" statement and SVXY's 83% fall.
- ^ “Set Capital LLC v. Credit Suisse Group AG, No. 19-3466”. U.S. Court of Appeals for the Second Circuit, April 27, 2021. How the notes worked, the 2010 to 2018 rise and the 2011, 2015 and 2016 drops, the January 29 to February 5 class period, the February 5 values ($108.37 to $72.59, just over $4, $4.22), the alleged hedging and frozen value, the $5.99 payout on February 21, about 15 million notes, the $1.8 billion loss and $475 to $542 million profit alleged, and the revival of the claims.
- ^ “Volatility Spike Triggers Inverse ETF (XIV) Closure”. Zacks Investment Research via Investing.com, February 6, 2018. The VIX's 115.6% rise on February 5, its biggest one-day jump on record, and SVXY continuing to operate.
- ^ “Chahal v. Credit Suisse Group AG et al.”. Cohen Milstein (plaintiffs' co-lead counsel), case page. The case history: 2019 dismissal, 2021 reversal, 2025 class certification, and the March 11, 2026 third amended complaint; case still active.
- ^ “Set Capital LLC v. Credit Suisse Group AG, 18 Civ. 2268 (AT), Order”. U.S. District Court for the Southern District of New York, February 11, 2025. The three issuances (9,018,880 notes in 2010, 5,000,000 in 2017, 16,275,000 on January 29, 2018) and the class certification ruling.
- ^ “Credit Suisse AG announces Nasdaq's intention to suspend trading of its XIV ETNs”. Credit Suisse AG, Form 6-K exhibit filed with the SEC, February 14, 2018. February 15, 2018 as the last trading day and accelerated valuation date.