*Countdown with Keith ...: Matt Taibbi on the "Rogue Trader" banking scandal at UBS

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[ame=http://www.youtube.com/watch?v=fmopYkLE02E&feature=related]Matt Taibbi on the "Rogue Trader" banking scandal at UBS - YouTube[/ame]
 

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SEC Busts First-Ever High Frequency Trader...

SEC Busts First-Ever High Frequency Trader in Market Manipulation Scam
Oct 20, 2014 — For one Wall Street firm, each day’s profits had come in the final seconds of market trading. In its first-ever case involving high frequency trading, the Securities and Exchange Commission has sanctioned a New York City-based trading firm for manipulating the NASDAQ market with massive numbers of trades in the final two seconds of nearly every trading day.
The barrage of transactions occurred during a six-month period in 2009 -- and though the firm was a small player in the market -- the torrent of trades comprised more than 70% of the total volume for the affected stocks in the final seconds of the trading day. Athena Capital Research, a privately-funded company with offices in New York and Hong Kong, admitted no wrong-doing but agreed to pay a $1 million penalty to settle the SEC’s charges.

The computer algorithm, known in-house as “Gravy,” flooded the NASDAQ platform with an onslaught of trades just before the market close each day in order to boost stock prices in Athena’s favor. In company emails, firm traders called it “owning the game,” according to the SEC. “Traders today can certainly use complex algorithms and take advantage of cutting-edge technology, but what happened here was fraud,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement, in a statement. “This action should send a clear message that the Commission and its Division of Enforcement have the expertise to investigate and charge even the most sophisticated fraudulent algorithmic trading strategies.”

In a process to fill remaining orders as the market concludes its trading day, NASDAQ conducts a closing auction. Athena would issue a trade to fill those orders and then place another transaction on the other side of the trade. The SEC says that the firm positioned itself as the “dominant firm – and sometimes the only one,” trading on these stock imbalances as the market closed.

Eventually, Athena achieved a 98% success rate in having their orders at least partially filled. The robo trades impacted the prices of tens of thousands of stocks in just seconds. Interestingly, neither the firm’s website nor the SEC’s case name the individuals responsible for the trades or identify the firm’s principals. No information was provided as to how much profit the firm netted from the scam -- or why the case dates back to 2009 though just received action.

SEC Busts First-Ever High Frequency Trader in Market Manipulation Scam - Page 2 - MainStreet
 

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