SEC Charges Trader for Scheme to Manipulate Exchange's Closing Auction
Aug. 16, 2022
File No. 3-20966
August 16, 2022 - The Securities and Exchange Commission today announced charges against Conrad Neil Normann, a former day trader based in Scottsville, New York, for carrying out a manipulative securities trading scheme.
The SEC found that Normann orchestrated a scheme that involved placing and then, seconds before market close, canceling "Closing D Orders," an order type offered by the New York Stock Exchange (NYSE). According to the SEC's order, Normann's orders fraudulently distorted the auction imbalance reflected in the NYSE's closing auction order imbalance messages - electronic messages published by the NYSE to market participants during the last ten minutes of trading and indicating, among other things, the balance of selling and buying interest for the NYSE's closing auction in a particular security.
The SEC found that on over 700 occasions between September 2017 and May 2018, Normann placed non-bona fide Closing D Orders - that is, orders that he did not intend to execute - to create a false appearance of increased supply or demand for a particular security during the five-minute window when NYSE included Closing D Orders in its closing auction order imbalance messages. Normann's orders fraudulently distorted the information provided in the published imbalance messages and concealed from other market participants the true expected supply and demand for the closing auction.
To benefit from this distortion, according to the SEC's order, Normann typically established a position on the opposite side of the market during the last minute of trading, when his non-bona fide Closing D Order was pending and reflected in the published imbalance information. Then, seconds before market close, Normann canceled his order, removing the false appearance of supply or demand that he had injected into the market. Normann typically then closed out his just-established long or short position in the closing auction, usually realizing a profit from his manipulative conduct. Normann reaped ill-gotten gains of approximately $95,000 from this scheme.
The SEC's order finds that Normann violated the antifraud provisions of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c) thereunder, and the anti-manipulation provision of Section 9(a)(2) of the Exchange Act. Without admitting or denying the SEC's findings, Normann agreed to settle the charges by consenting to a cease-and-desist order, disgorgement of $94,891, prejudgment interest of $15,447, a civil money penalty of $50,000, an associational bar, a penny stock bar, and an Investment Company Act of 1940 prohibition.
The SEC's investigation was conducted by Joshua R. Geller, John D. Marino, and Simona K. Suh of the Enforcement Division's Market Abuse Unit and Frank J. Milewski of the New York Regional Office, and supervised by Market Abuse Unit Chief Joseph G. Sansone. The SEC appreciates the assistance of the New York Stock Exchange Regulation and the Financial Industry Regulatory Authority.