I am reading the 2014 SEC filing against Athena, a HFT firm. (http://www.sec.gov/litigation/admin/2014/34-73369.pdf)

At point 29, they describe the behavior of Athena moments before market closing time. I am confused by 3:50:00.578. What are Sell Imbalance-Only orders? Why are they priced at only $0.01? And how do they help in Athena's profits?



2 Answers 2


From the Nasdaq page,

IMBALANCE-ONLY CLOSE ORDERS Provides liquidity intended to offset on-close orders during the Closing Cross.

  • Must be priced (limit), no market IO orders.
  • IO buy/sell orders only execute at or above/below the 4:00 p.m., ET, bid/ask.

They simply mean they were +\$0.01 or at \$23.56 from the price on their sell Imbalance-Only orders.

The same notation is used shortly after,

4:00:03.348 – NASDAQ ran its Closing Cross auction. Athena’s Sell Imbalance-Only Orders were filled by selling 233,979 shares for \$23.61, \$.03 or 13 bps, higher than the best offer in the milliseconds prior to Gravy.

  • $\begingroup$ Imbalance orders on NASD are not priced as on offset to the close, so i don't think this is correct. $\endgroup$ Jun 17, 2015 at 1:16
  • $\begingroup$ @JasonN I copied that straight from Nasdaq's website. $\endgroup$
    – pyCthon
    Jun 17, 2015 at 3:16
  • $\begingroup$ It is all really poorly explained in the documentation. I had to call NASD a few times to get things in the ballpark. That line is just referring to Imbalance only orders to sell, for example, will only execute at or above the best offer when the cross is executed. The IO limit order offer is reprised to best offer. These IO orders only participate in the cross when there is an opposite side imbalance so this repricing makes sense. $\endgroup$ Jun 17, 2015 at 3:32
  • $\begingroup$ This might have been what the SEC was referring to when they claim that Athens did things to ensure their orders were executed more often. Sending a penny to sell knowing it will be repriced to best offer seems very reasonable though. $\endgroup$ Jun 17, 2015 at 3:36

From what i understand about Athena's strategy, they always wanted to execute on the imbalance. They would drive the continuous price in one direction and cover in the cross at an in-/de-flated price.

Setting the sell price of an imbalance only order would basically be like sending a market order and give them the best chance of executed on the imbalance at close.

That's how i understood it, but a few things still don't make sense to me. It sounds like time shifting arbitrage, even if it wasn't pursued with the noblest of intentions.

I've run strategies that participated in the cross but don't know profitable this could have been. They did lose big on this too, which sounds definitely likely if the imbalance moves the other way on you.


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