SEC Charge Athena Capital WIth Fraud, Manipulative Trading Around End-Of-Day Order Imbalances

High-frequency trading (HFT) firm Athena Capital was fined $1 million according to a release put out by the Securities and Exchange Commission (SEC) on Thursday. The SEC charges that Athena manipulated "thousands of stocks" between June of 2009 and December of 2009. The manipulation focuses on the abuse of end-of-day stock imbalances. An imbalance occurs when there are more sellers than buyers or vice versa. The strategy apparently was responsible for over 70 percent of total NASDAQ trading volume seconds before the market closed.
The SEC's DIrector of the Enforcement Division said “Traders today can certainly use complex algorithms and take advantage of cutting-edge technology, but what happened here was fraud.” Market participants are looking at this as the SEC testing the waters for further prosecution. Oddly enough, the discovery of the fraud wasn't attributed to the high-cost program MIDAS the SEC purchased from an HFT firm called Tradeworx back in 2011. The fraud was discovered by sifting through emails. As Benzinga noted back in August, the relationship between HFT firms, brokerages, exchanges, institutions, and retail traders is very complicated. Hopefully this enforcement from the SEC is the true test for further action and not merely some one-off event designed to raise capital for the cash-strapped regulator.
Benzinga Premarket Prep co-host Dennis Dick highlighted also that this strategy would be difficult to pull off without having special access. Retail home-gamers with low-latency access would not be able to profit off this strategy.

Hopefully this will become a trend where the SEC shows it has the capacity to police America's financial market.