Hi,
I investigated this a bit.

TL;DR - this is intentionally off by default and opt in.
To use it you need:
- in the host set kvm.nested=1
- depending on your other virt stack set you might need to set host-passthrough 
or the sief2 feature (qemu -cpu host or ...,sief2=1)

Then the guest will have virt features "sie" in /proc/cpuinfo | grep
features

If anything we should consider backporting the "needs opt in" to Xenial.
That would be the following patch:
commit a411edf1320ed8fa3b4560902ac4e033c4a72bcf
Author: David Hildenbrand <d...@linux.vnet.ibm.com>
Date:   Tue Feb 2 15:41:22 2016 +0100

    KVM: s390: vsie: add module parameter "nested"
    
    Let's be careful first and allow nested virtualization only if enabled
    by the system administrator. In addition, user space still has to
    explicitly enable it via SCLP features for it to work.

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https://bugs.launchpad.net/bugs/1732162

Title:
  Zesty / Artful zKVM does not have /dev/kvm

Status in linux package in Ubuntu:
  Triaged

Bug description:
  For now we have 3 zKVM instances running Xenial, Zesty and Artful
  kernel respectively.

  The /dev/kvm does not exist on Zesty and Artful kernel.

  kvm-ok output on Zesty
  $ sudo kvm-ok
  INFO: /dev/kvm does not exist
  HINT:   sudo modprobe kvm
  modprobe: FATAL: Module msr not found in directory 
/lib/modules/4.10.0-40-generic

  kvm-ok output on Artful
  $ sudo kvm-ok
  INFO: /dev/kvm does not exist
  HINT:   sudo modprobe kvm
  modprobe: FATAL: Module msr not found in directory 
/lib/modules/4.13.0-17-generic

  ProblemType: Bug
  DistroRelease: Ubuntu 17.10
  Package: linux-image-4.13.0-17-generic 4.13.0-17.20
  ProcVersionSignature: Ubuntu 4.13.0-17.20-generic 4.13.8
  Uname: Linux 4.13.0-17-generic s390x
  NonfreeKernelModules: zfs zunicode zavl zcommon znvpair
  AlsaDevices: Error: command ['ls', '-l', '/dev/snd/'] failed with exit code 
2: ls: cannot access '/dev/snd/': No such file or directory
  AplayDevices: Error: [Errno 2] No such file or directory: 'aplay': 'aplay'
  ApportVersion: 2.20.7-0ubuntu3.2
  Architecture: s390x
  ArecordDevices: Error: [Errno 2] No such file or directory: 'arecord': 
'arecord'
  CRDA: Error: command ['iw', 'reg', 'get'] failed with exit code 1: nl80211 
not found.
  CurrentDmesg:
   
  Date: Tue Nov 14 11:18:49 2017
  IwConfig: Error: [Errno 2] No such file or directory: 'iwconfig': 'iwconfig'
  Lspci:
   
  Lsusb: Error: command ['lsusb'] failed with exit code 1:
  PciMultimedia:
   
  ProcEnviron:
   TERM=xterm-256color
   PATH=(custom, no user)
   XDG_RUNTIME_DIR=<set>
   LANG=C
   SHELL=/bin/bash
  ProcFB: Error: [Errno 2] No such file or directory: '/proc/fb'
  ProcKernelCmdLine: root=UUID=d86dc8de-6ac8-4e4b-aba8-92872a209a8c 
crashkernel=196M
  RelatedPackageVersions:
   linux-restricted-modules-4.13.0-17-generic N/A
   linux-backports-modules-4.13.0-17-generic  N/A
   linux-firmware                             1.169
  RfKill: Error: [Errno 2] No such file or directory: 'rfkill': 'rfkill'
  SourcePackage: linux
  UpgradeStatus: No upgrade log present (probably fresh install)

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