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VIX Auction Bets Land Chicago Trader With $1.3 Million Fine

Gunjan Banerji

Cboe Global Markets Inc. fined a trading firm for trying to include improper options trades in an auction tied to its marquee product: the VIX volatility gauge.

The Cboe Volatility Index, or VIX, tracks investor expectations for future turbulence in the stock market by using S&P 500 options prices.

Last year, questions escalated over whether a monthly auction tied to the VIX was being manipulated by traders. Cboe’s shares have tumbled about 31% over the past 12 months.

On Friday, Cboe said in a disciplinary filing that Akuna Securities LLC submitted S&P 500 option orders to increase the likelihood that certain derivatives bets would be included in the auction that helps determine final VIX settlement values. Akuna didn’t admit or deny violating Cboe’s rules and agreed to pay a $1.3 million fine, according to the filing.

The firm wasn’t fined for manipulation, a Cboe spokeswoman said in a statement.

Chicago-based Akuna is a derivatives trading firm dealing in options on commodities, stocks, cryptocurriencies and other assets. A spokeswoman for Akuna’s law firm declined to comment on the Cboe fine when reached by phone.

“Exchanges are being more active in investigations of this kind of trading conduct,” said Craig Pirrong, a professor at the University of Houston who has studied manipulation.

On Cboe’s findings, he said, “It has been hard to prove intent.”

In December, a federal judge sided with Donald Wilson Jr., founder and chief executive of proprietary trading firm DRW Investments LLC, in a showdown with the Commodity Futures Trading Commission regarding whether Mr. Wilson’s firm engaged in manipulation.

According to Cboe’s filing Friday, on three dates between 2016 to 2017, the final settlement values for VIX derivatives were swayed by the S&P 500 options orders that Akuna made.

Cboe looked at instant messages and emails to gauge whether Akuna intended to manipulate the auction or violated any rules, according to a person familiar with the case. The company also conducted on-record interviews, the person said, but found that Akuna didn’t intend to manipulate the auction. The firm made $6,726 from the improper options trades, according to the filing.

The Wall Street Journal reported last February that the Financial Industry Regulatory Authority was scrutinizing whether traders bet on S&P 500 options to influence VIX futures prices. Finra is Wall Street’s self-regulator and works with Cboe to help with surveillance of its market.

Sparse trading in Cboe’s monthly auction tied to the VIX last year caused alarm across Wall Street on whether it was being tampered with by traders. Cboe has since made changes to this monthly auction in an effort to clarify rules around it and make trading information more widely available.

Write to Gunjan Banerji at

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