Cboe Global Markets shares tanked Tuesday amid wild swings in market volatility and a persistent equities sell-off.
That scenario is normally good for exchanges, but not if it threatens the interest in one of your biggest money-making products: volatility futures.
The Cboe volatility index soared over 50 in wild trading Tuesday that investors said was exaggerated because of exchange-traded products that inversely track the Cboe's VIX. Trading was so extreme, it worried traders that investors may choose something else other than VIX-related futures to hedge positions in the future.
Also, the exchange-traded notes linked to the VIX may be forced to liquidate, and some already were. That would remove big buyers of the VIX futures, and loyal, consistent customers for the Cboe.
Cboe, which manages extensive options and securities trading worldwide, could see a hit to its top line if the whipsaws spook investors away and drive down fee revenue, according to investment firm KBW. Shares were down nearly 10 percent Tuesday afternoon.
"VIX options and VIX futures trading generated approximately 25 percent of Cboe's revenues in aggregate in the second half of 2017 (roughly split between these two products) — a meaningful growth driver for the company," analyst Kyle Voigt warned in a note. "We do note that when VIX has spiked in the past and the VIX futures term structure has flattened or become inverted, VIX futures open interest declined, along with volumes during a period of time thereafter.
"Our back-of-the-envelope math for XIV and SVXY suggests these two ETNs specifically could hold up to 25 percent of the short open interest in VIX futures specifically," Voigt added.
Cboe declined to comment for this story. The company reports quarterly earnings on Friday.
—CNBC's Bob Pisani contributed to this report.