Honestly, I really don't know these too well...I know enough to be dangerous, and not enough to be safe. I would (and have) told people to avoid these products because the continuous money stream you get from them means there's a huge risk you're not properly considering--but hindsight is a bit useless at this point. But this point has really stuck with me to see the people who lost millions who should have known better.
....as I've side-stepped your question thus far, let's try to answer: I'm not quite sure I understand what you're asking, but are you asking if the derivatives lead the underlying? I've honestly wondered about this with the VIX because it has no intrinsic asset value underlying it, and market forces during a panic could snowball into a cash exodus that would require the fund manager to send market orders to an illiquid market that would then produce market forces that move the underlying--and creating a feedback loop that pushes prices of the derivative lower, which in turn pushes the underlying lower, which then leads derivative prices lower. So, I really don't know; I have my suspicions; and I'm eagerly awaiting this to be dissected academically to see.
Most of my ETN knowledge was picked up yesterday after the market closed and XIV started dumping. I follow the VIX options market a bit more closely. But I use them differently than the ETNs would try to--using ratio spreads to pick up the early part of a shock down move, while limiting risk and eliminating the loss of sensitivity due to an increasing market--and I expect to pay for this protection.
Honestly, my recommendation to anyone would be the same advice I follow. I don't understand this well enough, the reward side of the equation looks huge, and so too must the risk side. And lack of understanding + high risk = stay the heck away.
I wouldn't mind seeing the VIX derivatives go away completely. I have my doubts that even professionals are considering the risk of these appropriately. I get the feeling that the assumption was that the 80% point was something unprecedented and they believed this lack of precedent to be a hard floor (and in fact below their perceived floor) of the ETN product. The reality was that this had a greater than 100% loss exposure to it (which I presume that in excess of 100% was retained by CS), but it's presentation as an ETN meant that it looked like 0 was a floor. So even if this risk is disclosed to and understood by the individual purchasing, I don't believe that the (lower) perception of this risk lines up with the (higher) rational understanding of it. Add that to my concerns that derivatives activity could affect the underlying (which anecdotally may have been confirmed yesterday)...
