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ARTICLE · 24 OCTOBER 2014

US SEC Brings First Enforcement Action For Market Manipulation Through High-Frequency Trading

Mayer Brown
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Near the end of each trading day, NASDAQ runs a closing auction to fill all on-close orders at a price targeted to the price of the stock in the continuous market.

United StatesFinance and Banking
Matthew Rossi
Matthew Rossi
J. Gregory Deis
J. Gregory Deis
Jerome Roche
Jerome Roche
Kathleen Przywara
Kathleen Przywara
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Keywords: SEC, enforcement action, high-frequency trading, HFT

Providing another reminder of the US federal government's ongoing scrutiny of high-frequency trading ("HFT") firms and manipulative trading practices involving HFT, the Securities and Exchange Commission recently settled its first market-manipulation case against a HFT firm under Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5, which prohibit fraudulent conduct in connection with the purchase or sale of securities.

In an October 16, 2014 Order, Athena Capital Research, LLC ("Athena"), a New York City-based HFT firm, agreed to pay a $1 million penalty to settle the SEC's administrative charges, without admitting or denying the SEC's findings.1 In its Order, the SEC found that during a six-month period in 2009, "using high-powered computers, complex algorithms, and rapid-fire trades, Athena manipulated the closing prices of tens of thousands of [NASDAQ] stocks during

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