Plaintiffs and regulators have recently used academic research utilizing statistical analysis and data filtering rules to identify instances that they have alleged to represent market manipulation. In this CRA Insights, Sam Lynch, Rahul Chhabra, and Swati Kanoria have explored concerns related to the possible manipulation of the special opening quotation (SOQ) of SPX options on expiry days.
The authors have studied overnight returns of the underlying securities following months with positive returns (up months) and following months with negative returns (down months). Their analysis suggests that inventory management by market makers is more plausible an explanation of higher SOQ on expiration days rather than market manipulation. Click here to read more about using economic analysis to understand patterns of trading in financial markets.
