Introduction to Opening & Closing Auction Imbalance Manipulation
QUICK DEFINITION: When a trader enters a large auction-only order, and then enters multiple opposite-side continuous trading orders in an attempt to push the auction price in the direction favoring the trader’s auction-only order.
The SEC’s enforcement action against Athena Capital Research demonstrated the vulnerability of the opening and closing auctions to manipulation.
By entering large auction-only orders, and then entering continuous trading orders on the opposite side, a trader can push the auction price in the direction favoring the trader’s large auction-only order.
An example of auction imbalance manipulation shown in Surveyor
Reviewing Opening & Closing Auction Imbalances in Surveyor
More on Surveillance Exceptions
Next, learn more about marking the close, also known as window dressing.