Ex-market regulator: ‘Crazy’ products are ‘wild bets’ that need to be regulated

“Crazy” products like the one that contributed to the recent market volatility need to be regulated, former financial regulator Bart Chilton told CNBC on Wednesday.

“Even Vegas … they haven’t come up with as wild of bets as we have for these ETNs,” said Chilton, referring to exchange-traded notes.

Two ETNs, in particular, have stood out amid the market tumult of the last few days: the ProShares Short VIX Short-Term Futures and the VelocityShares Daily Inverse VIX Short-Term ETN (XIV).

Both trade using leverage and provide inverse returns to the market’s “fear gauge” known as the Cboe volatility index — the VIX. When the VIX falls, the two products rise. When the VIX soared Monday, both securities suffered severe losses.

Source: CNBC

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