Speed trader fined $1 million for Nasdaq manipulation scheme.
Dr. Ahmet Karagozoglu says this closing price manipulation reminds him why closing prices are different from settlement prices in futures markets. In light of Athena Capital Research LLC case he suggests that, to prevent closing price manipulation in stock markets, regulators and stock changes should learn from the rules of futures exchanges.
Historically, futures exchanges in the U.S. and abroad have been concerned about potential manipulation of closing prices each trading day. Since margin accounts are marked-to-market at the end of each trading day, exchanges had established rules to prevent the negative effect of unfounded quotes and trades during the closing minutes (seconds) of trading on the margin account settlements. Thus, we have both closing and settlement price in futures markets. Exchange rules describe how the end-of-day settlement prices are determined in order to prevent closing price manipulations which are attempted to generate unfair margin profits.
Securities and Exchange Commission (SEC) says with “high-powered computers, complex algorithms and rapid-fire trades,” the New York-based firm tainted closing prices used by fund managers to track their performance.