Skip to comments.How Wall Street’s ‘fear gauge’ is being rigged, according to one whistleblower
Posted on 02/13/2018 1:53:24 PM PST by Red Badger
One of the most popular measures of volatility is being manipulated, charges one individual who submitted a letter anonymously to the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The letter makes the claim to regulators that fake quotes for the S&P 500 index SPX, +0.26% are skewing levels of the Cboe Volatility Index VIX, -2.50% which reflects bearish and bullish options bets 30-days in the future on the S&P 500 to gauge implied stock-market volatility (see excerpt from the letter below).
The flaw allows trading firms 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. This market manipulation has led to multiple billions in profits effectively taken away from institutional and retail investors and cashed in by unethical electronic option market makers.
The whistleblowers claims are consistent with those documented by John Griffin, professor of finance at the University of Texas and Ph.D. candidate Amin Shams in May 2017 in research that says the cost of manipulating less-liquid SPX options would be more than paid for by a successful bet on the direction of the VIX. The paper is consistent with the whistleblowers conclusionthat manipulators are moving prices of the SPX options by spoofing at settlemententering quotes for trades that are never executedto paint the tape and, therefore, influence the value of expiring VIX derivatives.
Opinion: How S&P 500 options may be used to manipulate VIX fear gauge
The VIX has underpinned a number of strategies described as so-called short-volatility, which imploded dramatically last Monday when VIX, also known as Wall Streets fear gauge, registered its largest percentage change in its history, cratering bets that volatility measures would fall, if not remain muted.
(Excerpt) Read more at marketwatch.com ...
This just can’t be. The stock market would no more be rigged by insiders than our Dept of Justice and FBI would try to rig an election. Its unpossible!
Is it possible that one George Soros and his allies on Wall Street “rigged” the VIX index to their benefit, especially in potentially creating a “false flag” financial crisis?
Was talking with someone (liberal) yesterday, he was of the opinion that the market was too high and ripe for correction. Now it seems to me that Trump's popularity rests largely on the economy, that a drop in the market could force opinion against him in a big way. If that drop should come maybe a month before the midterm elections...
The Stock Market is NOT THE ECONOMY............
Yep, make Trump look bad.....................
Not Soros, no. But there’s plenty of other people trying to make a buck on Wall Street. That guy’s 88 years old and basically hasn’t traded in 20 years.
But the facts of the matter are even simpler than that! 1) Some #NEVERTRUMPERS with big bucks want to make Trump look bad 2)some investors/hedgies didn't think that Trump's tax cuts would work, so they went short 3)and the BIG one...the damned programed trading kicked in and is now running the DOW and the CBOE messes.
There was absolutely NOTHING out there, that most could see, to crash the market in '87! IT WAS THE EARLY PROGRAMMED TRADING THAT SET THAT ONE OFF! Luckily, there were still more than enough warm bodies on the floors of the exchanges, to "save" and "right" the markets, within that same week.
Bubble/shmubble....that "crash", back in '08, just as McCain rose to 3 or 4 points over Obama in the latest poll? If you don't believe that there was a "fiddle" and an extra thumb on programmed trading re that one, I have an old CBOE floor badge to sell ya...cheap! :-)
Yes, I have always believed they did this in 2008 as well to ensure we would have 0bama in the White House
You mean the Casino might be rigged in their favor?? Wow! What’s next the FBI, DOJ, NSA, CIA, Congress,...
well at least they aren’t talking about enforcing any laws and breaking up families.
IMO that kind of headline is the media's continuing gleeful attempt to link any damaging news directly to Trump regardless of the validity of the association.
The market was never meant for the retail (little guy) investor, even before VIX.
Derivatives. Funny money, no value indices, bit coin. All straight up gambling wagers. Nothing but a crap table in a very thin disguise.
If you are in these are the rules you play by.
I said this market move smelled bad last week and it still does. The market does not go up all the time but the timing of this change was very curious.
Some say we have been in a bull market for 9 years and the correction is over due. Bull spit. We have been in a mostly struggling lack luster recovering market for the 8 of the last 9 years. Until this last year there has been very little movement that was not just recovery from the deep canyon of 2008 / 2009.
I have an easier, simpler theory than that about the 2008 crash. It coincided with higher fuel prices. Fuel is one of the prime movers of the US economy. Fuel prices would have been much easier to manipulate than the market, and have a more direct and fundamental effect.
Not looking for a "fight"; just posting about a topic I know well. The fact is that when you take the human element out of trading, markets behave stupidly/crazily/without rhyme or reason. That's a large part of how, besides the FED's interference, the markets didn't crash & burn during wee barry's horrid 8 years.
The night of the leman Brothers Reichstag burning. Race was tied with new arrival Sara Palin generating buzz... calls were made, LB burned. Others next store Bear Stearns given automatic toobigtofail bailouts.
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