Options market hit with data disruption as VIX lurches

VIX Spikes

The VIX jumped to 21.26 from 13.94 at 10:02 a.m. New York time. The next price was 13.92. The 21.26 trade was later erased from the public record. At 11:22 a.m. New York time, the VIX posted another temporary spike: up to 15.27 from 14.16, and then immediately back down to 14.17, according to data compiled by Bloomberg. It happened again at 12:19 p.m. with a jump to 19.53 and retreat to 14.31, the data show.

“These moves in the VIX index can happen occasionally and they don’t affect the trading of the underlying options and futures and they don’t have a market impact,” Bill Speth, vice president of research at CBOE, said in a phone interview.

Later, CBOE said on its website that the unusual moves in the VIX were caused by a “software issue” that was resolved as of 1:21 p.m. New York time.

Data Quality

The SEC has questioned the quality of options market oversight, telling Chicago-based Options Clearing Corp. in September that it has “serious concern about systemic weaknesses in OCC’s risk management and operations,” according to a letter obtained by Bloomberg News. The clearinghouse guarantees all trades on U.S. options exchanges. The SEC also chastised the CBOE in June for a supervision breakdown that resulted in a $6 million fine.

The stock market saw its own disruption today. Nasdaq OMX said one of its two smaller exchanges is experienced a technical malfunction.

The Nasdaq BX exchange, which usually handles about 2% of U.S. equity volume, said it’s investigating “issues with a number of customer hosts,” according to a notice on its website. “The issue is affecting certain order entry, DROP and ITCH ports,” according to New York-based Nasdaq OMX, the second-largest owner of U.S. stock exchanges.

Trading continued, according to data compiled by Bloomberg, even though other exchanges including Nasdaq’s biggest market stopped sending orders there.

www.bloomberg.com

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