The investigation found that Athena Capital Research used an algorithm to engage in a practice known as "marking the close," in which stocks are bought or sold near the end of the trading day to impact their closing price, a release said.
"The massive volumes of Athena's last-second trades allowed Athena to overwhelm the market's available liquidity and artificially push the market price—and therefore the closing price—in Athena's favor. Athena was acutely aware of the price impact of its algorithmic trading, calling it 'owning the game' in internal e-mails," the SEC wrote in a release.
The SEC claims Athena developed strategies to dominate trade in the last few seconds of a trading day. These trades made up more than 70 percent of the volume of these stocks in the run-up to the close on the Nasdaq.
Without admitting or denying the findings, Athena has agreed to pay a $1 million penalty to settle the case, the SEC's first on high frequency trading manipulation.
The trading firm said in a release that it believed its trading activity "helped satisfy market demand for liquidity during a period of unprecedented demand for such liquidity." Athena added that it stopped running the trading strategy several years ago as those market needs diminished.