Marking the Close

Between at least June through December 2009, Athena made large purchases or sales of the stocks in the last two seconds before NASDAQ's 4:00 p.m. close in order to drive the stocks' closing prices slightly higher or lower. The manipulated closing prices allowed Athena to reap more reliable profits from its otherwise risky strategies. Internally, Athena called the algorithms that traded in the last few seconds Gravy.

Although Athena was a relatively small firm, it dominated the market for these stocks in the last few seconds. Its trades made up over 70 percent of the total NASDAQ trading volume of the affected stocks in the seconds before the close of almost every trading day.

Athena's trading targeted closing order imbalances, which occur when there are insufficient on-close orders to match buy and sell shares. NASDAQ runs a daily closing auction and begins publishing imbalance information at 3:50:00 p.m. to help fill on-close orders at the best price. Athena typically placed an Imbalance-Only order right after the first imbalance message, then traded on the opposite side until just before the close, aiming to end the day with no open position.

Athena's Mach strategies targeted securities likely to have more buy or sell orders than the other side at the 4:00 p.m. close. Starting at 3:50:00 p.m., NASDAQ sent Net Order Imbalance Indicator messages showing each stock's predicted imbalance, updated every five seconds until 3:59:55 p.m. Athena used Meat to refer to accumulation immediately after the first Imbalance Message and Gravy to refer to its last second trading strategies. A version of Gravy placed limit orders in six phases, starting at 3:59:58.35 p.m. and ending at 3:59:59.95 p.m.

Athena knew its last-second Gravy trades moved prices and used them to give its accumulation an extra push. Athena refined a way to manipulate NASDAQ's Closing Cross, which can increase volatility and distort metrics tied to the closing price.

The SEC found that Athena willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The order requires Athena to cease and desist from committing or causing violations of Section 10(b) and Rule 10b-5, censures Athena, and requires Athena to pay a civil money penalty of one million dollars. Without admitting or denying the findings, Athena agreed to pay the penalty and to cease and desist from committing or causing any future violations of the securities laws.

Section 9, Section 10(b) and Rule 10b-5

Section 9 of the Securities Exchange Act of 1934 is headed Manipulation of security prices. Under Section 9(a)(2), it shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange, to effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

Under Section 10(b) of the Securities Exchange Act of 1934, it shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

Under Rule 10b-5, it shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, to employ any device, scheme, or artifice to defraud under paragraph (a), or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person under paragraph (c), in connection with the purchase or sale of any security. Paragraph (b) covers making any untrue statement of a material fact and omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

The Sheshunoff Order

The order of July 11, 1996, is Release No. 37419, Administrative Proceeding File No. 3-9040, issued under Section 21C of the Securities Exchange Act of 1934. The respondent was Alexander Sheshunoff, Sr., of Austin, Texas. Marking the close is the practice of attempting to influence the closing price of a traded security.

The findings of the order include the following. Business Records Corporation, known as BRC, had common stock that trades on NASDAQ. From approximately July 1990 through April 1995, Sheshunoff made 326 trades in BRC stock in six accounts at four different broker-dealers, and 52 percent of the trades were the last trade of the day. Of the trades, 66 percent were either the last trade or occurred after 3:30 p.m., and 80 percent were purchases in 100-share lots.

Sheshunoff's purchases were 0.33 percent of the total volume of 17,905,700 shares over the 58 months. His trading usually resulted in a market uptick from the bid to the ask price, and BRC closed each day twelve and one-half cents to one dollar per share higher than the previous trade.

The Commission determined that marking the close constitutes market manipulation and therefore is a violation of Section 10(b) and Rule 10b-5, and found that Sheshunoff's purchases of BRC stock constituted marking the close. Sheshunoff consented to the order without admitting or denying the matters set forth in it, and the order requires him to cease and desist from committing or causing any violation, and any future violation, of Section 10(b) and Rule 10b-5.

The Spear, Leeds & Kellogg Order

The order of July 21, 2003, is Exchange Act Release No. 48199, Administrative Proceeding File No. 3-11189. The respondent, Spear, Leeds & Kellogg, L.P., known as SLK, is a member of the New York Stock Exchange, has been registered with the Commission as a broker-dealer since 1948, and is based in New York, New York. Marking the close refers to the manipulative practice of attempting to influence the closing price of a stock. The findings of the order include the following.

Baron Capital, Inc., known as Baron Capital, is a broker-dealer registered with the Commission since 1982. Southern Union Company had common stock traded on the New York Stock Exchange under the symbol SUG. The pricing period was a ten-day window in 1999, running from October 19 to November 1, that set the cash-and-stock mix for the acquisition of Pennsylvania Enterprises by Southern Union. Baron Capital bought SUG at or near the close of trading in order to raise and maintain the price. Baron Capital, through SLK's executions, was the closing trade for seven of the ten days of the pricing period. During the relevant period, SLK lacked adequate procedures specifically to detect and prevent marking the close.

The SEC found that Baron Capital violated Section 15(c)(1)(A) of the Securities Exchange Act of 1934 by marking the close of SUG, and the SLK order clerks aided and abetted Baron Capital's violations of Section 15(c)(1)(A). SLK failed reasonably to supervise employees with a view to preventing the employees from aiding and abetting the violation of Section 15(c)(1)(A). Pursuant to Section 15(b)(4), SLK is censured.

The Helbock Order

The order of September 26, 2006, is Release No. 54512, Administrative Proceeding File No. 3-12312, in the matter of John F. Helbock. The order makes findings about supervision of marking the close at a broker-dealer, Phillip Louis Trading, Inc. Joseph R. Huard, Jr. was a registered representative whom Helbock supervised, and Helbock was head trader and supervisor at Phillip Louis from January to April 2002.

From about January through November 2002, Huard ran a manipulative scheme that included marking the close at month-end in small-cap securities. He executed over 165 buy trades on the last day of months in penny stocks held in the portfolios of a group of hedge funds, many within the last thirty minutes of trading, to affect prices and inflate the portfolio values of the hedge funds. Huard pled guilty on December 18, 2002, to one count in each of two indictments, for conspiracy to commit wire, mail, and securities fraud, and for conspiracy to commit wire and securities fraud.

Helbock noticed that Huard placed many hedge fund trades on the last day of the month near the close, which was unusual for a firm where about 90 to 95 percent of business was proprietary trading. Helbock raised the pattern with Huard and with John P. Figliolini, Jr., the chairman and president of Phillip Louis, and both said the trading was not improper. Helbock took their statements at face value and made no further inquiry.

The written supervisory procedures of Phillip Louis required Helbock to review all daily order tickets by the next business day and contained anti-manipulation guidelines barring marking the close through uptick or downtick trades near the close. Helbock did not review all order tickets daily, did not check whether Huard was marking the close, and did not conduct the required weekly and monthly customer account reviews.

The SEC found that Helbock failed to reasonably supervise Huard with a view to detecting and preventing Huard's violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The order suspends Helbock from acting in a supervisory capacity with any broker or dealer for twelve months and requires him to pay a civil money penalty of twenty thousand dollars. Helbock neither admitted nor denied the findings, except as to the Commission's jurisdiction.

The Competitive Technologies Case

In Litigation Release No. 18827, the SEC announced a civil fraud action in federal court in Hartford against Competitive Technologies, Inc. and seven individuals. The SEC alleged that from at least 1998 through 2001, the defendants artificially raised the price of Competitive Technologies stock, which was listed on the American Stock Exchange, and that their favored painting technique was marking the close, in which they placed numerous orders at or near the close of the market to inflate the reported closing price. The SEC alleged that the defendants made the closing trade on almost 300 trading days and raised the reported closing price on more than 90 percent of those days. The SEC charged violations of Section 17(a) of the Securities Act of 1933 and of Sections 9(a) and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

In Litigation Release No. 20692, dated August 28, 2008, the SEC reported developments in Securities and Exchange Commission v. Competitive Technologies, Inc., et al., Civil Action No. 3:04 CV 1331 JCH in the District of Connecticut. A jury returned a verdict for the Commission on all securities fraud charges against Sheldon A. Strauss on November 29, 2007, after a three-week trial in Bridgeport, Connecticut. On August 27, 2008, the court imposed a civil penalty of ten thousand dollars on Strauss and permanently enjoined him from violating the antifraud provisions.

The Complaint and Judgment Against Michael J. Ling

In Litigation Release No. 23224, dated March 27, 2015, the SEC announced charges against Michael J. Ling, a New Jersey-based day-trader. The complaint was filed in the U.S. District Court for the District of New Jersey, Civil Action No. 15-cv-02179. The SEC alleged that Ling used marking-the-close trades and matched trades in the shares of Cyberdefender Corp. to keep the stock at or above four dollars per share from September 2009 through June 2010, and that maintaining a closing bid price at four dollars per share or higher for ninety consecutive trading days prior to application was a prerequisite for a listing on the Nasdaq Capital Market. The SEC alleged violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rules 10b-5(a) and 10b-5(c).

In Litigation Release No. 23439, dated December 23, 2015, the SEC reported that Ling consented to a final judgment entered on December 23, 2015. The judgment permanently enjoins Ling from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and requires him to pay a total of five hundred fifty-four thousand five dollars and ninety-eight cents.

The Gallagher Trial

The second amended complaint of the SEC in Securities and Exchange Commission v. Steven M. Gallagher, Case No. 21-cv-8739 in the U.S. District Court for the Southern District of New York, identifies marking the close as the practice of buying or selling stocks near the close of trading to affect the closing price. The complaint alleges that Gallagher used his Twitter account from at least December 2019 to at least October 2021 to urge followers to buy microcap stocks while selling his own shares, and that for at least two issuers he placed end-of-day buy orders to raise closing prices. The complaint alleges violations of Section 17(a) of the Securities Act of 1933, Section 9(a)(2) of the Securities Exchange Act of 1934, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

In the statement of Margaret Ryan, Director, Division of Enforcement of the SEC, dated Sept. 19, 2025, after a nine-day trial, a jury in the United States District Court for the Southern District of New York found Steven M. Gallagher liable for securities fraud and manipulative trading. For two stocks, Gallagher was also found to have engaged in manipulative trading by marking the close, a strategy involving placing end-of-day orders to buy stock at above-market prices.

FINRA Rules and Surveillance

Under Rule 2020 of FINRA, headed Use of Manipulative, Deceptive or Other Fraudulent Devices, no member shall effect any transaction in, or induce the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance. Under FINRA Rule 2010, a member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.

The 2025 FINRA Annual Regulatory Oversight Report lists, among effective practices, maintaining a surveillance program that is reasonably designed to detect manipulative trading schemes, naming in parentheses momentum ignition, layering, front running, trading ahead, spoofing, wash sales, prearranged trading, marking the close, mini-manipulation.

The 2026 FINRA Annual Regulatory Oversight Report lists, among surveillance deficiencies, not establishing and maintaining a surveillance system reasonably designed to monitor for different types of manipulative trading schemes, naming in parentheses potential layering, spoofing, wash trades, prearranged trades, marking the close, odd-lot manipulation, with parameters that are reasonably designed and documented.

FINRA Disciplinary Actions

In the Disciplinary and Other FINRA Actions report for July 2020, Moloney Securities Co., Inc. is the subject of an Acceptance, Waiver and Consent issued May 4, 2020. The firm failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with applicable rules pertaining to the detection and prevention of marking the close, a form of manipulative trading. The firm was censured, fined one hundred thousand dollars, and ordered to pay restitution of fifteen thousand five hundred seventy-four dollars and thirteen cents, plus interest, to a customer.

In the Disciplinary and Other FINRA Actions report for September 2021, Laidlaw & Company (UK) Ltd. failed to establish, maintain and enforce a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with federal securities laws and FINRA rules prohibiting market manipulation. The firm failed to detect instances of potential marking the close, including multiple occasions when orders to purchase the stock of an investment banking client were entered, either in customer accounts or representative accounts, within the last ten minutes of the trading day at prices at or above the previous trading price. An Acceptance, Waiver and Consent issued July 15, 2021, censured the firm, fined it one million five hundred thousand dollars, and ordered it to certify that it has reasonably enhanced its supervisory system and written supervisory procedures.

Exam Relevance

The Securities Industry Essentials examination content outline lists, under Topic 3.3.1, Market Manipulation, the bullets Definition of market manipulation and Types of market manipulation with market rumors, pump and dump, front running, excessive trading, marking the close, marking the open, backing away, and freeriding named in parentheses. Candidates should check the current outline before the examination.

Common Misunderstandings

Marking the close can only raise a closing price. Athena made large purchases or sales of the stocks in the last two seconds before NASDAQ's 4:00 p.m. close in order to drive the stocks' closing prices slightly higher or lower.

Marking the close requires dominating the day's trading volume. In the Sheshunoff order, his purchases were 0.33 percent of the total volume of 17,905,700 shares over the 58 months.

Marking the close involves a single order. Athena made large purchases or sales of the stocks in the last two seconds before the close, a version of Gravy placed limit orders in six phases, and Sheshunoff made 326 trades in six accounts at four different broker-dealers.

Only the person who places the orders is responsible. In the Helbock order, the SEC found that Helbock failed to reasonably supervise Huard with a view to detecting and preventing Huard's violations, and in the order of July 21, 2003, SLK failed reasonably to supervise employees with a view to preventing the employees from aiding and abetting the violation of Section 15(c)(1)(A).

A broker-dealer that executes the orders bears no responsibility for marking the close. In the order of July 21, 2003, the SEC found that SLK lacked adequate procedures specifically to detect and prevent marking the close.

Only the SEC addresses marking the close. The 2025 and 2026 FINRA Annual Regulatory Oversight Reports list marking the close among manipulative trading schemes, and the FINRA disciplinary actions published in July 2020 and September 2021 censured and fined firms over supervisory systems for marking the close.

A complaint announced by the SEC establishes that marking the close occurred. Litigation Release No. 23224 announces the charges against Michael J. Ling, and the outcome appears in a separate release, Litigation Release No. 23439, which reports a final judgment entered on his consent.

Key Points to Retain

Marking the close is a practice in which stocks are bought or sold near the close of trading to affect the closing price.

Marking the close is the manipulative practice of attempting to influence the closing price of a stock.

The SEC found that Athena Capital Research, LLC willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 in marking the closing price of publicly-traded securities.

In the Sheshunoff order, the Commission determined that marking the close constitutes market manipulation and therefore is a violation of Section 10(b) and Rule 10b-5.

In the 2003 SEC order against Spear, Leeds & Kellogg, L.P., SLK lacked adequate procedures specifically to detect and prevent marking the close.

The 2025 and 2026 FINRA Annual Regulatory Oversight Reports list marking the close among manipulative trading surveillance deficiencies.