Whistleblower alleges manipulation in the VIX fear gauge

Why wait until the end to point out that this letter is most likely nonsense? Seems unlikely that people are getting scammed out of hundreds of million dollars a month.

I tracked down the actual letter here and confirmed it has all sorts of stupid stuff in it. https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/r8LCxXQ4...

Repeatedly blames the CME, which has nothing to do with the VIX. Losses to investors of trillions in a week, what? The mechanism they describe is that the indicative VIX value is affected by option orders (true) and this somehow affects VIX futures (I'm skeptical). The only time this index affects VIX futures directly is during settlement, and the only example they provide totally mangles the definition of implied volatility.

Furthermore, they are complaining about someone posting a 0.35 executable bid in a illiquid market where the offer price is oscillating between 1.40 and 9.80. Doesn't seem sinister considering far out of the money options are known to be illiquid.

>A Cboe spokesman told CNBC: "We take our regulatory responsibilities and the oversight of our markets very seriously. This letter is replete with inaccurate statements, misconceptions and factual errors, including a fundamental misunderstanding of the relationship between the VIX Index, VIX futures and volatility ETPs, among other things. As a result of these errors, we feel the conclusionary statements contained in this letter lack credibility."

A brokerage made a bet against the VIX[1]. Was on HN several days ago [2].

[1] http://fortune.com/2018/02/10/vix-index-hedge-fund-colorado/

[2] https://news.ycombinator.com/item?id=16346175

Their allegations don't explain volpacolypse though, which is the really interesting and somewhat of a gray swan scenario.

Also, those rumors (people manipulating VIX near expiration dates) have been circulating for a while now and CBOE has denied all of them.

I'm mostly interested to see what the SEC makes of it all and if there will be any indictments made, but I honestly doubt that there will be.

The manipulation was not with the vix. it may have been with the vix futures that caused XIV and SVXY to fall so much . Vix and vix futures not the same thing.

This article is old news - it's from a week ago.