New York City-based high frequency trading firm Athena Capital Research agreed to pay $1M to settle charges it placed a large number of aggressive, rapid-fire trades in the final two seconds of almost every trading day during a six-month period to manipulate the closing prices of thousands of NASDAQ-listed stocks. This marks the first high frequency trading manipulation case. According to the government, Athena Capital used an algorithm that was code-named Gravy to engage in a practice known as “marking the close” in which stocks are bought or sold near the close of trading to affect the closing price. The massive volumes of Athena’s last-second trades allowed Athena to overwhelm the market’s available liquidity and artificially push the closing market price in Athena’s favor. Athena was well aware of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails. SEC
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