SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

To further investigate historical patterns of end of day volatility, Figure 8 graphs variance
in the last half hour of the day for each quarter since 1986. As the graph indicates,
variance was greater than one for the vast majority of quarters, indicating that volatility
has consistently been higher at the end of the day than during the middle of the day. It has
not been uncommon for normalized variance (averaged over the quarter) to exceed 1.5,
especially in the late 1980s and the late 1990s. Average normalized variance greater than
2.0 has been unusual, observed for only seven quarters since 1986. The peak values of
volatility occurred in periods of market turbulence: Q4 of 1987 and Q4 of 2008,
respectively.
3
2.5
2
1.5
1
0.5
Figure 8
S&P 500 Futures Variance in the Final 30 Minutes of Trading
By Quarter, 1986-2008
(Normalized: Value of 1 equals average variance over the day)
0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
11
DRAFT: Produced by OEA
SEC_OEA_FCIC_001812