Who are the main market makers or participants expected to provide liquidity for VIXI?

Answer

The news release about the launch of VIXI – the “Enhanced Long‑Volatility ETF with Leveraged Short S&P 500 Exposure” does not name any specific market‑making firms or liquidity‑provider participants. However, based on how new, complex ETFs are typically brought to market and the structure of VIXI, we can outline the types of market participants that are expected to provide liquidity for this product:

How These Participants Work Together for VIXI

1. Primary‑Market Liquidity (Creation/Redemption)

   • Authorized Participants (APs) will be the first line of liquidity. When a large institutional investor wants to obtain a block of VIXI shares, the AP will create new shares by delivering the required basket of VIX futures, cash, and short‑S&P 500 exposure to the fund. Conversely, when an investor wants to redeem shares, the AP will receive the ETF shares and return the underlying assets to the fund.
     
   • Because VIXI’s structure involves leveraged short exposure to the S&P 500, APs must also be able to source the short‑beta component (e.g., via futures, total‑return swaps, or securities‑loan arrangements).

2. Secondary‑Market Liquidity (Exchange Trading)

   • Designated Market Makers (DMMs) and Primary Market Makers (PMMs) post continuous bids and offers on the exchange where VIXI is listed. Their quotes must reflect the combined cost of holding VIX futures (long volatility) and the cost of maintaining a leveraged short S&P 500 position.
     
   • HFT firms and electronic liquidity providers use sophisticated algorithms to hedge the ETF’s exposure in real time, ensuring that the market‑making activity does not drift far from the ETF’s net‑asset‑value (NAV).
     

3. Liquidity‑Enhancement Programs

   • The exchange may run a “market‑maker incentive” program for VIXI, offering rebates or fee reductions to firms that meet certain depth‑and‑quote‑size thresholds. This encourages top‑tier market makers (e.g., Citadel, Jane Street) to provide tighter spreads, especially during the ETF’s early trading days when order‑flow can be volatile.
     

4. Secondary‑Market Participants (Investors & Hedge Funds)

   • Proprietary desks and hedge funds that run volatility‑carry or market‑neutral strategies will often hold VIXI as a core position. Their trading activity adds sizeable limit orders and block‑trade capabilities, which further deepens the market.
     

Why These Participants Are Critical for VIXI

• Complex Exposure – VIXI blends a long VIX position (typically via VIX futures or VIX‑linked ETFs) with a leveraged short exposure to the S&P 500. This dual‑nature creates a need for market makers who can simultaneously hedge both sides in separate markets (volatility and equity).
  
• Potential for High Intraday Volatility – VIX‑related products are known for large price swings, especially around market‑stress events. Robust market‑making ensures that price discovery remains orderly and that the ETF’s market price stays close to its NAV.
  
• Liquidity During the Launch Phase – New ETFs often experience “liquidity boot‑strapping” where market makers must absorb the initial surge of investor interest. Having a diverse set of liquidity providers (APs, DMMs, HFTs, hedge‑fund desks) mitigates the risk of wide bid‑ask spreads in the first weeks of trading.
  

Bottom‑Line Takeaway

While the press release does not list specific firms, the expected liquidity‑providers for VIXI will include:

• Authorized Participants (large dealer banks) for creation/redemption,
• Designated/Primary Market Makers such as Citadel Securities, Jane Street, Susquehanna International Group, Virtu Financial, and Two Sigma,
• High‑Frequency Trading and electronic liquidity firms (e.g., Hudson River Trading, Optiver, Flow Traders, IMC Trading),
• Proprietary and hedge‑fund desks that run volatility‑carry or market‑neutral strategies,
• Broker‑dealers and exchange‑sponsored liquidity programs that supplement the above.

These participants collectively ensure that VIXI can be bought and sold efficiently, that its price tracks the intended combination of long volatility and leveraged short equity exposure, and that the ETF remains a viable tool for investors seeking a “beta‑neutral” volatility play.