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How Wall Street’s ‘fear gauge’ is being rigged, according to one whistleblower
www.marketwatch.com ^ | Published: Feb 13, 2018 4:31 p.m. ET | By Mark DeCambre & Francine McKenna

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 whistleblower’s 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 whistleblower’s conclusion—that manipulators are moving prices of the SPX options by spoofing at settlement—entering quotes for trades that are never executed—to “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 Street’s 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 ...


TOPICS: Business/Economy; Crime/Corruption; Culture/Society; US: New York
KEYWORDS: dow; nasdac; sp; stockmarket; vix; vixmanipulation
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1 posted on 02/13/2018 1:53:24 PM PST by Red Badger
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To: Red Badger

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!


2 posted on 02/13/2018 2:00:54 PM PST by PGR88
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To: Red Badger

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?


3 posted on 02/13/2018 2:02:25 PM PST by RayChuang88 (FairTax: America's Economic Cure)
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To: Red Badger
The ability to spook investigators and tank the market without actually committing any capital.

Scary.

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...

4 posted on 02/13/2018 2:06:15 PM PST by ZOOKER (Until further notice the /s is implied...)
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To: ZOOKER

The Stock Market is NOT THE ECONOMY............


5 posted on 02/13/2018 2:08:49 PM PST by Red Badger (Wanna surprise? Google your own name. Wanna have fun? Google your friends names......)
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To: RayChuang88

Yep, make Trump look bad.....................


6 posted on 02/13/2018 2:09:23 PM PST by Red Badger (Wanna surprise? Google your own name. Wanna have fun? Google your friends names......)
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To: RayChuang88

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.


7 posted on 02/13/2018 2:09:31 PM PST by babble-on
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To: PGR88

8 posted on 02/13/2018 2:10:51 PM PST by EEGator
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To: RayChuang88
Look, it doesn't even have to be the Soros Consortium, but he could have a finger in it.

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! :-)

9 posted on 02/13/2018 2:32:58 PM PST by nopardons
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To: PGR88

It’s Inconceivable!


10 posted on 02/13/2018 2:38:06 PM PST by silverleaf (A man who kneels for the national anthem doesn't stand for much of anything)
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To: RayChuang88

Yes, I have always believed they did this in 2008 as well to ensure we would have 0bama in the White House


11 posted on 02/13/2018 2:38:22 PM PST by PMAS (All that is necessary for the triumph of evil is that good men do nothing)
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To: silverleaf

12 posted on 02/13/2018 3:00:04 PM PST by gaijin
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To: Red Badger

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.
/s


13 posted on 02/13/2018 3:07:04 PM PST by eyeamok (Tolerance: The virtue of having a belief in Nothing!)
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To: Red Badger
There was a headline just a few days ago that the drop in stock market diminished President Trumps touted claims of economic success values by 25%.

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.

14 posted on 02/13/2018 3:27:41 PM PST by pfflier
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To: Red Badger

The market was never meant for the retail (little guy) investor, even before VIX.


15 posted on 02/13/2018 4:00:17 PM PST by Chauncey Gardiner
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To: Red Badger

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.


16 posted on 02/13/2018 4:26:57 PM PST by Sequoyah101 (It feels like we have exchanged our dreams for survival. We just have a few days that don't suck.)
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To: nopardons

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.


17 posted on 02/13/2018 5:03:23 PM PST by Hardastarboard (Three most annoying words on the internet - "Watch the Video")
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To: Hardastarboard
Look, I pinned the '87 CRASH on program trading, in about 2 seconds and was later proved correct. That WAS the start of the manipulations and as time went on, with fewer and fewer, to now just about NOBODY on trading floors, it is what I said it is.

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.

18 posted on 02/13/2018 5:19:21 PM PST by nopardons
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To: gaijin

Simply inconceivable.


19 posted on 02/13/2018 5:30:06 PM PST by silverleaf (A man who kneels for the national anthem doesn't stand for much of anything)
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To: PMAS

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.


20 posted on 02/13/2018 6:34:07 PM PST by epluribus_2 (he had the best mom - ever.)
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