HFT Firm Pays $1 Million Fine for Marking the Close
A fund manager that used high frequency trading algorithms agreed to pay a $1 Million fine for manipulating end-of-day prices in certain thinly-traded securities. The SEC charges that the firm “marked the close” of several NASDAQ-traded stocks by accumulating large positions dictated by its trading programs. The firm accumulated most of its positions in the last two seconds before the close as part of NASDAQ’s closing auction. In internal emails, the firm referred to its trading strategy as “Gravy,” discussed “dominating the auction” and “owning the game,” and expressed concern about regulatory scrutiny. The SEC claims that this action “marks the first high frequency trading manipulation case.”
OUR TAKE: The SEC has high frequency trading firms and strategies in the regulatory cross-hairs. Also, it may be wise to avoid prideful emails about how successful the firm has become through its complicated strategies.