ETN liquidity risk

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Exchange-Traded Notes—Avoid Unpleasant Surprises | FINRA.org⁠

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Why are we bothering with an ETN like VXZ at all?

the issuer is promising to pay exactly the return on an index (minus its own expenses, of course), there's little risk of tracking error

some ETNs promise to deliver the returns of a particular index that isn't available in an ETF framework

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Liquidity risk

Liquidity risk: The trading activity of ETNs varies widely. For ETNs with very low trading activity, bid-ask spreads can be exceptionally wide. For example, in March 2021 one ETN had an average spread of 11.8%

Issuer’s credit risk

The ETN's ability to pay back the principal—plus gains from the index it tracks—depends on the financial viability of the issuer. As a result, an ETN's value is impacted by the

credit rating⁠

of the issuer. The value of the ETN could decline due to a

downgrade⁠

in the issuer's credit rating, even though there was no change in the underlying index.

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Backup data

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Recent warnings

From April 8, 2022 — VXX outflows at to market which was trading at a premium

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