On Friday, March 9, Atlantic Trading USA LLC (Atlantic) filed a class action complaint in Chicago federal court against numerous unnamed trading firms, alleging manipulation of the Chicago Board Options Volatility Index (VIX). Atlantic alleges that, from 2011 to the present, trading firms have manipulated the VIX settlement price by placing aggressive buy orders during the HOSS auction and then taking advantage of the artificially high VIX settlement price to cash out of expiring long VIX derivatives at a profit. Atlantic claims to represent a nationwide class of investors that has traded VIX futures or options since 2011 and seeks damages "in the hundreds of millions of dollars." The case is captioned Atlantic Trading USA LLC. V. John Does 1-100, 18-cv-01754 (N.D.Ill.), and the complaint can be found here.
Similar class action complaints were recently filed in New York federal court, alleging collusive and manipulative VIX trading in violation of the Sherman and Clayton Acts, respectively. Those cases are captioned Samuel v. John Does 1-100, 18-cv-01593-AT (S.D.N.Y.) and David Quint v. DRW Holdings and John Does, 18-cv-01980-AT.
Plaintiffs in these cases are serving subpoenas on the Chicago Board Options Exchange and the Chicago Futures Exchange to obtain information sufficient to identify the firms involved in the trading activity at issue. We expect this process to take at least one month and, more likely, it will probably require several months. In the meantime, as a protective measure, trading firms should consider retaining, in addition to their routine account statements and order flow records, any other records reflecting HOSS order imbalances and the firm's own objective risk and value assessments that formed the basis for their trading decisions during this time.
Steve Bedell, Katie Trkla, Tom Krebs, and Ellen Wheeler have represented numerous clients in numerous VIX-related regulatory proceedings and have defended regulators' allegations of VIX manipulation arising from SPX order activity in the HOSS on VIX settlement day − an issue central to these lawsuits.
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