March 12, 2018

A Chicago-based trading firm has filed a lawsuit seeking to uncover the identities of traders who may have been manipulating Wall Street’s main gauge of future stock market volatility, the VIX index, causing losses for other investors.

The proposed class-action lawsuit was filed in the U.S. District Court for the Northern District of Illinois late on Friday.

The lawsuit, filed on behalf of Atlantic Trading USA, LLC and other parties, alleged the firm suffered financial losses as a result of manipulation of certain contracts related to the Cboe Global Markets, Inc’s (CBOE.O) volatility index VIX.

After trading in range between 10 and 20 for several months, the VIX spiked to a high of over 50 on Feb. 6 as the U.S. benchmark S&P 500 stock index slumped nearly 12 percent in 10 days. Traders betting on the VIX staying flat or falling were hurt in the process and this may have exacerbated selling pressure on stocks.

The lawsuit comes five weeks after some products indirectly linked to VIX lost more than 90 percent of their value in one day following the U.S. stock market selloff in early February.

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The plaintiff signaled an intention to issue a subpoena to the Cboe, for information identifying the unnamed traders, a statement by the plaintiff’s lawyers Cafferty Clobes Meriwether & Sprengel LLP and Cohen Milstein Sellers & Toll PLLC, said on Monday.

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