Credit Suisse Group AG (ADR) CS took the trading community by surprise when the firm announced it will liquidate the popular Credit Suisse AG – VelocityShares Daily Inverse VIX Short Term ETN XIV after the fund plunged more than 80 percent Monday, triggering an “acceleration event.”

The XIV was halted Tuesday, but the announcement of its liquidation has traders concerned about the fate of other inverse funds that are tied to the CBOE Volatility index (VIX), particularly if the stock market sell-off gains momentum in coming days.

SVXY Safe For Now

The ProShares Trust II SVXY fund, another popular inverse volatility fund with averaging daily trading volume of more than 66 million, was also halted =Tuesday. Some traders were initially speculating ProShares would also be forced to liquidate the SVXY, but the firm assured investors the SVXY is alive and well.

“We expect the fund to be open for trading today and we intend to continue to manage the fund as usual,” ProShares said in a statement.

However, once the fund opened for trading at 11:35 a.m. ET, it promptly tanked 83.6 percent and is down more than 90 percent since Thursday’s close.

Other Funds At Risk

The Credit Suisse AG – VelocityShares Daily Inverse VIX Medium Term ETN ZIV was also halted Tuesday and has yet to resume trading as of 12:30 p.m. ET. Credit Suisse didn’t mention the ZIV in its announcement about the XIV. Like the XIV, the ZIV is tied to VIX futures contracts, but the ZIV contracts are medium-term rather than short-term.

The UBS AG VelocityShares VIX Short Volatility Hedged ETN linked to the S&P 500 VIX Futures XIVH plummeted 63.9 percent Tuesday and is now down 72.9 percent in the past three sessions.

Technical Volatility

Even the short volatility instruments that survived Monday’s meltdown still aren’t out of the woods just yet. The S&P 500 stabilized on Tuesday, but volatility was still on the rise.

Fortunately, Barclays analyst Maneesh Deshpande said Tuesday much of the VIX’s increase has been technical in nature and not a result of an uptick in risk perception.

“While the initial increase was driven by the selloff in equities, the increase in the VIX index was due to a lack of liquidity and the bulk of the move in VIX futures happened after the close and demand was likely driven by leveraged VIX ETP managers,” Deshpande said in a note.

The iPath S&P 500 VIX Short Term Futures TM ETN VXX is up another 15.9 percent in mid-day trading.