It’s the trading symbol for the iPath Long Enhanced S&P 500 VIX Mid-Term Futures ETN. We saw the circular from Direct Edge, where it began trading today. It’s not some cheese ball confection lofted by off-shore subsidiaries of Boca Raton broker-dealers. It was created by Standard & Poor’s. It’s underwritten by Barclays.

VZZB is an exchange-traded note (ETN), an uncollateralized debt obligation backed by Barclays that trades like a stock, leverages returns, depends on volatility and consists of futures contracts that mimic the supposed future volatility of an index. For gains.

Why should you care, sitting there in the IR chair? Eight of ten days, your stock is moving because somebodies speculated on the divergence of this versus that, or some other bodies tweaked their risk-management schemes to offset increasing implied volatility. Or whatever. It’s all interrelated. If you want to know why your stock behaves the way it does, you must see it in context of how markets work and what behaviors drive supply or demand in your shares.

VZZB’s name says it all. Literally. First, it goes long its components, buying them, not borrowing them and selling them short. Second, it’s “enhanced,” which means it’s using options to outperform the benchmark – for a day. Third, it’s based on the S&P 500. Fourth, it’s really derived from the VIX, the Chicago Board Options Exchange’s wildly popular measure of the implied volatility of the S&P 500 index (VIX options expire the 20th in the middle of earnings). And finally, its components are daily rolling VIX futures contracts four, five, six and seven months out – the “mid-term” – that simulate volatility at various points in the future.

Yet it offers correlated, enhanced returns today. Just a day. And realize this: There is an options chain for this instrument. You can trade puts and calls on this derivative, comprised of derivatives of derivatives, and their implied, leveraged volatility.

Need to help your CFO see why your stock sometimes does the craziest things? Say to him or her: “Look up this ticker, VZZB. Read how it works. Now think about the mindset that invests in volatility as an asset. It’s not fringe behavior. VZZB’s first cousin VXX regularly trades 30 million shares daily.”

Lesson for the observant: Barclays thinks market volatility is back. A Barclays executive said of the launch, “We continue to see investor demand for exposure to volatility…”

And there you have it. Money is buying volatility as an asset class.

Sunday night after flying back from Antigua by way of Newark, I reviewed a week’s worth of client stock alerts for perspective. Stepping through a side exit and closing the door on life’s cacophony for a week, time stops. The return, the jolt of the madding crowd, is revealing. It’s amazing what you see.

More in a moment, but I promised some of you I’d share what we saw beyond the Truman Show. Apparently you can’t get from Denver to the French West Indies in a day on one airline, so we overnighted in Newark, touched down in Antigua, caught Eric Air, a fast little twin engine Cessna with a sharp-witted French pilot (Eric) and alighted in Guadeloupe.

Home for a week was a 70-foot catamaran. Our back yard stretched from Petite-Terre to Iles de Saintes, a coral-reefed shot of paradise where I put on scuba gear for the first time. By the looks on our faces off Marie Galante (where I needed a shave), you know we were on the Sea of Tranquility.

Speaking of needing a shave, that’s how the data looked when it slammed me out of the islands upon return. Careening commodities. Whole swaths of clients up and down 2-3% in waves over days. Chunks of erroneous trades, especially in health care stocks. Trend traders and programs for models and funds reversing course May 2 after the VIX euphoria that began April 20.

Seeing it at once was somewhat stunning. Does it mean anything, or is it simply more jarring en masse – like seeing your face after not shaving for a week, in my case? It’s a bit of both. Markets aren’t about to collapse by any means, but these rocking currents, sloshing white caps evident upon farther inspection, are what happens when prices become uncertain.

It may mean nothing ultimately. But a year ago, April 22-27 to be precise, we were telling clients how program traders had suddenly turned fearful. They furled sails and battened hatches with hedges (prices don’t drop then, they…coast). And they were right, as May 6, 2010 showed.

Having reviewed a chunk of data now post Guadeloupe, we see a disconnect forming between enthusiastic investors and cautious risk managers. It’s a buoy in the water for the wise that says there are shoals.

We’re just observers of data. We expect investors will navigate through the reef. But food for thought: Both economically and geographically, Greece is no island. If the Euro skids aground there, it’ll run the dollar up the mast. Stocks are a weight going the other way.

First this on equity markets: Last week we noticed a surge in “volatility trading.” We’ve written before about these tactics that capitalize on volatility as the asset instead of the direction of the markets or a given security.

You should know about them because they’ll impact your price even if you trade less than 100,000 shares per day. We can find these things in market structure because certain firms specialize in it. When they show up, we watch what happens around them, thus discovering who else does it and what effect they have on market structure.

Under normal circumstances there wouldn’t be much. But we’ve woven such a tight risk-management net around algorithmic execution that everything reacts to everything else. Volatility traders who previously were using the VIX and similar measures perhaps have lately discovered that they can nudge risk-management algorithms around and produce volatility. It’s another unintended consequence of “systemic risk,” which can only exist when something artificially impedes natural failure.

Back to small caps. The average trade size in US markets today is less than 300 shares. We find in our pool that it’s closer to 200 shares. That’s partly due to the way the SEC measures “best execution,” or the quality of trades under SEC Rule 605. Broker-dealers must be within standard deviation of broad industry measures or they’re subject to fines. Naturally, over time executions become similar: about 186 shares per trade, regardless of market cap.

Say a multi-billion-dollar stock trades 26,000 times per day (and prices millions of times), while a stock with $500 million in market cap trades a thousand times. Both average 186 shares per trade.

A value institution is constrained by market structure from owning the smaller company. If they execute 100 trades, or 18,600 shares, high-frequency systems front-run and price them out of the market. Over time, the most efficient and compliant mechanism for owning small-caps are big risk-averse ETFs and algorithms cutting across hundreds or thousands of stocks, such as Renaissance Technologies or AXA or Dimensional Fund Advisors might run (through big prime brokers), or which Vanguard or Barclays iShares or Deutsche Bank Powershares might continually direct through their prime brokers and direct-market access channels.

Thus, small-caps become quant holdings. The problem is that small-caps and large caps alike need rational holders who stay the course through market swings and business cycles, the sort of thing that emotionless execution just won’t do.

This is a regulatory issue, IROs and execs. Structure is screening out your fundamental holders. How do we solve it? Speak up! Voice your opinion! Rules are supposed to create level playing fields, not advantage the dispassionate.