Athena Capital Research agreed to pay $1 million to settle charges by the SEC that the high-frequency trading firm made aggressive, rapid-fire trades in the final two seconds of almost every trading day to manipulate the closing price of thousands of Nasdaq-listed stocks.
The Securities and Exchange Commission said it was its first manipulation case against a high-frequency trading firm.
The SEC in an order released Thursday said Athena used “a sophisticated algorithm” to manipulate the closing price of stocks daily for six months starting in June 2009.
The algorithm, code-named “Gravy,” allowed Athena to overwhelm the market’s available liquidity and artificially push the market price and, as a result, the closing price, in Athena’s favor, the SEC said.
Athena knew of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails, the SEC said. The agency also claimed Athena’s algorithmic strategies became increasingly focused on ensuring that it was the dominant — and sometimes the only — firm trading desirable stock imbalances at the end of each trading day.
The SEC said Athena did not admit to the agency’s findings as part of the settlement. Officials at Athena could not be reached for comment by press time.