The Securities Exchange Commission on Thursday charged a New York-based trading firm of manipulating the closing price of thousands of Nasdaq-listed stocks from June to December 2009.
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 dominated 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.