[ by Melanie Gretchen ] If you want more proof on the dangers of investing in an ETN, here's an illustration of what can go wrong. To put it another way, if you invested $100,000 in this note, it's now worth $40,000. Trading in Exchange-Traded Notes for Security. In the past week, the VelocityShares 2x Long VIX Short Term Exchange note, managed by Credit Suisse Group AG, lost 60% of its value.  Now under preliminary review by the SEC, the note had about $700 million in assets before the decline, according to people familiar with the matter. A Trend Of Note. The Credit Suisse note, which trades as TVIX and is designed to track stock-market volatility, follows the plummet of another exchange-traded note this week, a Barclays Capital product designed to track natural gas, for reasons that investors say remain unclear. What Makes Exchange-Traded Notes So Popular. While hedge funds have been the most active traders of the securities, the notes have become more popular with smaller investors, in part because they are low cost and easy to trade. But what looks like a plain-vanilla instrument can have pitfalls, said Samuel Lee, an analyst at Morningstar Inc. who follows exchange-traded investments:

"It's an issue of financial innovation opening up these esoteric markets and allowing individual investors pile into them faster than the regulators can keep up."

Hopefully, the SEC can catch this tiger before it runs wild. For further details, go to [WSJ, 3/29/12].