Credit Suisse Tumbles On Fears Of Massive XIV Loss

Update: from Credit Suisse communications department:

Background: Please note there is no impact to Credit Suisse – we are completely hedged.

On the record: “The XIV ETN activity is reflective of today’s market volatility. There is no material impact to Credit Suisse.”

* * *

In addition to being the creator of the now infamous XIV ETN  - which was reportedly the most popular way of shorting volatility for retail investors, all of whom now face almost certainly total losses - Credit Suisse also happened to be its biggest holder. 

Which, now that the ETN appears fated for termination, is suddenly a very big problem for Credit Suisse since according to the latest public filings, the Swiss bank owned 4.79 million units, or over $550 million, worth of XIV at yesterday's close of $115.55, and roughly $480 million less at today's after hours closing tick of $15.43. Of course, if the ETN is redeemed - and with its NAV at $4.22 according to the VelocityShare website - the loss could be total.

And while the question remains who exactly is eating the losses at Credit Suisse - the bank or its clients - the market is not taking chances, and Credit Suisse ADRs have tumbled in Asian trading...

... because if Credit Suisse is on the hook, it would mean two quarters of profits have just been wiped out: recall that CS reported roughly $250MM and $300 million in profits in the last two quarters, which would mean that the XIV loss was roughly equivalent to half a year's worth or profits, an outcome which the regulators will be very interested in, not to mention shareholders, clients, and their lawyers.

Finally, completing the irony, there's this:

Comments

NoDebt Juggernaut x2 Mon, 02/05/2018 - 21:00 Permalink

Guys, everybody needs to calm the fuck down.  Earlier today from our brand new Fed Head:

"our financial system is now far stronger and more resilient than it was before the financial crisis that began about a decade ago. We intend to keep it that way."

Are you calling him a liar?  Everything is OK.  Everything is stable.  Whatever you are worried about, stop worrying.  Calm the fuck down.  It's OK.  OK?

 

 

In reply to by Juggernaut x2

BaBaBouy Oldwood Mon, 02/05/2018 - 21:17 Permalink

NODEBT - I agree, Tomorrow probably a big up day Coming back, no doubt with the $$$'s from Mr. FED ...

We can see they are Collapsing the Cryptos, Bitcoinz is now under 6.5K, and GOLD is doing absolutely NOTHING...

One of these days they will lose control completely, maybe not just yet...

In reply to by Oldwood

NoDebt NoDebt Mon, 02/05/2018 - 21:11 Permalink

"which was reportedly the most popular way of shorting volatility for retail investors, all of whom now face almost certainly total losses"

Are we learning yet?  When the shit hits the fan there is no "product" you can buy that will protect you as a retail investor.  When it goes down you CAN NOT DO ANYTHING to protect yourself, let alone capitalize on the plunge.  YOU WILL BE LOCKED OUT OF THE CASINO.  THE BETTING WINDOW WILL BE CLOSED AND YOU WILL NOT BE ABLE TO CASH IN YOUR TICKET, EVEN IF IT'S A WINNER.

Is this sinking in?  I hope to God this is sinking in with at least one person.

 

 

In reply to by NoDebt

Cutter Mon, 02/05/2018 - 20:36 Permalink

Exactly.  While this isn't the return of the GFC, there will be pockets of systemic and counterparty risk.  This is going to end up showing up in places we wouldn't even think about.

stormsailor FullHedge1 Mon, 02/05/2018 - 21:04 Permalink

if she breaks that 2542, its baaaaad.  it reminds me of sept 08,  charts been going up everyday for a year, there are no natural resistance lines anywhere, other than man-made fabianacchi lines. 

anybody remember when they outlawed shorting bank stocks, when the market rolled over it was straight down, us /es traders made bank on that idiocracy.

In reply to by FullHedge1

NoPension Mon, 02/05/2018 - 20:40 Permalink

This whole situation is starting to get a familiar feel to it. 

Counterparty risk.....

I remember, 10 years ago...when the banks got real touchy lending to each other...and then " it " really got started. 

mr bear Mon, 02/05/2018 - 20:41 Permalink

Imagine the people you'll see storming the gates when Credit Suisse announces a bail-in. Expect to see a lotta guys with Mauritius passports, wearing $25,000 Rubinacci bespoke suits and flip-flops.

Peak Finance Mon, 02/05/2018 - 20:48 Permalink

Other than their 3x Vix craziness

They have some good products that are solvent. What happens to those if the parent goes down? Each ETF runs like it's own little trust right? 

Not sure how these things are organized at the accounting / fund level. 

 

pc_babe Mon, 02/05/2018 - 20:59 Permalink

all the historic circuit breakers (human traders) have been upgraded to algos. No way the pitiful few programmers can keep up with gale force winds of change that be coming