A proprietary trading firm filed a complaint accusing unknown traders of manipulating the Chicago Board Options Exchange Volatility Index ("VIX index").
In the class action complaint filed in the U.S. District Court for the Northern District of Illinois, Atlantic Trading USA, LLC ("Atlantic Trading" or the "Plaintiff") alleges that unknown persons and entities (the "Defendants") have been manipulating the monthly final settlement prices of expiring VIX contracts since 2011. Atlantic Trading regularly trades VIX contracts and claims to have suffered financial losses as a result of the alleged manipulation.
The VIX index, also known as the "fear gauge," measures the 30-day implied volatility of the S&P 500 Index ("SPX"). The Chicago Board Options Exchange ("CBOE") calculates the final settlement price for VIX contracts based on the SPX options orders on the settlement day for the contract. During this time, the Plaintiff alleges that Defendants manipulated SPX options orders to cause artificial VIX contract settlement prices in the expiring contracts. The unnatural spike in the VIX settlement price prior to the day's close is evidence of manipulation, according to the Plaintiff.
Because the CBOE does not release records of trades, Atlantic Trading is unable to identify the Defendants. However, the Complaint concludes that the spike in the settlement price indicates trader manipulation. A preliminary analysis by the Plaintiff's attorneys determined that investors lost potentially hundreds of millions of dollars in VIX futures due to Defendants' manipulation of products traded on the CBOE and CBOE Futures Exchange.
The Plaintiff charged the Defendants with violating CEA Section 22. The Plaintiff seeks the certification of a class of "[a]ll persons who traded VIX futures or options contracts on the CBOE Futures Exchange or the Chicago Board Options Exchange between January 1, 2011, and the present."
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