Former US Treasury secretary Lawrence Summers urged the Securities and Exchange Commission (SEC) and relevant exchanges to look into the historic surge in the most-watched gauge of US financial volatility.
“My understanding is that because there are some illiquid instruments that go into the calculation of the VIX, the VIX had a somewhat artificial move on Monday,” Summers said on Bloomberg Television’s Wall Street Week with David Westin on Friday. “Since that is so widely watched an indicator, issues of liquidity, issues around how it settles, I think should be studied by the relevant parties in the industry and the regulator — the SEC.”
Experts in gauging volatility have since told Bloomberg that the move could have been caused by several technical factors, including the apparent lack of liquidity, some short covering in misfired volatility bets, or simply how the gauge is calculated.
“If one looks at the VIX futures, which are a somewhat different instrument, the movements were much, much less dramatic,” Summers said. “The SEC and the relevant exchanges may want to pay a bit of attention.”