NEW YORK (Reuters) - The Cboe Volatility Index .VIX, Wall Street’s so-called “fear gauge,” logged an orderly monthly settlement on Wednesday, which is likely to help allay concerns that the index is manipulated on settlement days.
The VIX futures June settlement, calculated using a subset of S&P 500 .SPX options, was 12.27, according to Cboe data. The VIX opened during regular trading hours at 12.47.
“Today’s SPX auction, which determines VIX settlement values, went very well,” Cboe President Chris Concannon said in an emailed statement. “Similar to the auction in May, liquidity formation was robust and supported a smooth settlement process,” he said.
The settlement price sets the value of billions of dollars in expiring in VIX derivatives. In recent years there have been increasing instances of big deviations between the VIX settlement price and VIX values right after the market open.
Since a volatility shock in February, the Cboe has been dogged by accusations that its VIX settlement process is prone to manipulation.
Market participants worry that unscrupulous traders may be deliberately moving the settlement price for illicit gains. Allegations of manipulation of the settlement price got a boost in April when the monthly settlement price deviated by a record margin of nearly 2 points from the VIX index open price.
The Cboe denies those allegations and has said it has taken steps to make the settlement auctions more liquid, including upgrading the technology behind the process.
Wednesday’s settlement process marks the second monthly settlement after the exchange made these changes and is the second straight monthly settlement that market participants have deemed orderly.
On Wednesday, the VIX index was down 0.79 point at 12.56.
Reporting by Saqib Iqbal Ahmed; Editing by Dan Grebler