Saqib Iqbal Ahmad

NEW YORK, (Reuters) – Shares in a volatility-tracking ETN (exchange-traded note) soared nearly 10 months on Tuesday. This was just a day after a British bank. Barclays (LON) stated that it has suspended sales and issued shares because of capacity limitations.

Shares in iPath Series B short-term futures ETN soared as high as 45%, to $41.61, but then lost 16.4%.

Banks issue ETNs as debt securities with the promise of paying holders a return tied to performance or benchmarks. The product is particularly popular with investors since another ETN tracking volatility, XIV, went bankrupt in a matter days in February 2018. This resulted in nearly $2 billion of losses for shareholders.

VXX share’s rapid rise exacerbated the losses of short sellers, who were trying to target volatility ETN.

S3 Partners reports that short sellers (who sell borrowed shares) are looking for a way to earn a profit by buying back those shares at a later time at a lower price. According to S3 Partners the paper was down $463m, 74%.

S3 Partners data revealed that this included losses totaling $189 millions on Tuesday.

Barclays VXX ETN issuer expects to resume sales and issuances as soon it has the capacity. However, it said that its inventory is not sufficient to allow for further sales or any issuances.

VXX shares could drift from their indicative prices due to the suspension of share creation. This is because they are no longer trading at the correct price according to the value of their underlying securities.

Large banks typically buy and sell shares in order to keep ETNs’ indicative values at par. However, the suspension of new shares can cause this process to break.

VXX traded at $33.81, which is $7.5 more than its indicative value. It traded at one time $14 above its indicative price.

Matt Thompson, managing director at Chicago-based investment advisor Thompson Capital Management said, “That’s (a) huge premium…this is almost like AMC’s short squeeze, buyers attacking name knowing that they can’t make shares,”