If government shuts, what happens to IPO market?

Rich Clement | Bloomberg | Getty Images

What would happen to the hot IPO market if the government shut down?

There are several big names slated to go public this week. Tomorrow night, three big brand names are supposed to price: Burlington Stores, ReMax, and Empire Realty Trust (think Empire State Building). On Thursday, Potbelly is supposed to price.

The SEC has to sign off on the price and terms of any IPO before it starts trading, but it's not clear what parts of the SEC would continue to function in the event of a shutdown.

In response to my inquiry, SEC spokesperson John Nester told me: "The SEC will be able to stay open in the event of a funding lapse because we have carryover funds available."

It is not clear how many funds they have, or how long they could stay open, or even if they would remain fully staffed. Filings or disciplinary actions might be affected. But one thing is clear: if the SEC did have to shut down, they would not be able to approve IPOs. That would include Twitter, as well.

Elsewhere: what, me worry? Stocks down, but the Dow was down between 100 and 150 points most of the day. The CBOE Volatility Index bounced around between 16 and 17, but was being sold for most of the day.

It's simple: the trading community does not believe stocks will have a big problem, even if there is a shutdown for several days.

Partly that's because the other 17 times there was a shutdown there were few if any effect on stocks.

One thing's for sure: traders are making money SELLING volatility. Traders who bought protection a few weeks ago, when the VIX was 13 or 14, can now sell their positions with the VIX a bit higher, around 16. For example, traders tell me that 12,000 contracts of the October 1660 S&P puts were sold today. Those puts were less expensive several weeks ago, so somebody just made some money selling them higher.

And if we get a sudden spike in volatility, you can bet a lot of pros will be selling volatility right into it.

By CNBC's Bob Pisani