SEC brings small, but important case against HFT

Mary Jo White
Andrew Harrer | Bloomberg | Getty Images

The SEC has charged a small firm, Athena Capital Research, with using rapid-fire trades in the final seconds of the trading day to manipulate the closing prices in some NASDAQ-listed stocks.

The SEC alleges Athena used an algorithm called Gravy to "mark the close." It traded on the order imbalances that occur at the end of the day. When there is an imbalance between buyers and sellers, NASDAQ routinely runs an auction to fill the order imbalances at the best price at the close. Athena, the SEC says, placed orders to fill imbalances, then traded shares on the market prior to the close on the opposite side of the order.

The trading occurred in a short period from June to December 2009.

While the firm is small and the fine of $1 million is not much, I think it is important symbolically.