VIX Manipulation Costs Investors Billions, Whistle-Blower Says
- Flaw lets traders whip VIX around without trading, letter says
- Wild trading session last week turned spotlight on Cboe index
Tiny Hedge Fund Makes 8,600% Profit Off VIX Surge
A whistle-blower told U.S. regulators that a scheme to manipulate the VIX, the volatility gauge thrust into the spotlight last week during a wild trading session, costs investors hundreds of millions of dollars a month.
A Washington-based lawyer told the Securities and Exchange Commission and Commodity Futures Trading Commission -- the nation’s top markets regulators -- in a letter Monday that his client found a flaw that allows traders “with sophisticated algorithms to move the VIX up or down by simply posting quotes on S&P options and without needing to physically engage in any trading or deploying any capital.” Billions in purportedly ill-gotten profits have been scooped up by “unethical electronic option market makers,” according to the letter.