Barclays To Replace VXX With VXXB

As planned in the original VXX prospectus from its launch in 2009, VXX will be delisted as a security next week on Jan 30, 2019. Barclays has issued the replacement, VXXB, which is currently trading and is essentially identical to VXX.

To help with the transition, Barclays has published a VXX/VXXB comparison sheet as well as guidance around the transition process.

We have been keeping an eye on the outstanding number of ETNs for both VXX and VXXB over the past month. Very little progress has been made in the transition and VXX continues to hold about 3x the assets of VXXB, with VXX holding $921M as of yesterday.

If VXX's market cap does not come down substantially by Jan 28 there exists a potential for a temporary volatility crash on Jan 29 through Jan 30 as Barclays will need to pay cash out to holders on VXX on Jan 30.

However, as outlined in the guidance document, there exists an option for larger investors to take no action and simultaneously sell positions in VXX and buying equivalents in VXXB and may happen in the last days of VXX trading. This would be the smoothest transition route but it is not clear the percentage of holders will be utilizing this option.