Is the VIX fixed? Trader alleges manipulation of volatility index derivatives

By Lene Powell, J.D. A new lawsuit alleges that anonymous traders have been conspiring to manipulate the prices of derivatives based on the Chicago Board Options Exchange (CBOE) Volatility Index (VIX). Filed in the Southern District of New York, the suit joins several similar actions in alleging that some combination of financial institutions, market makers, and/or traders on the CBOE futures and options exchanges have been using a vulnerability in the S&P 500 Index Options (SPX) price settlement process to manipulate derivatives tied to the so-called “fear index.” The suit seeks treble damages under the Sherman Act and Commodity Exchange Act (Musso v. Does, March 14, 2018). Manipulating the “fear gauge”? Based on the S&P 500® Index, the VIX measures near-term stock volatility. Various derivatives are based on the VIX including futures, options, exchange-traded funds (ETFs) and exchange-traded notes (ETNs). The settlement price for these…

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