What they did - fraud. How they did it - shill bidding.[1] Why this is illegal - You aren't allowed to manipulate the market. Why the regulator acted - They

What they did - fraud. How they did it - shill bidding.[1] Why this is illegal - You aren't allowed to manipulate the market. Why the regulator acted - They needed to make an example of a HFT firm as there is a perception that HFT firms manipulate the market but regulators don't understand and therefore can't regulate them. My take - This was 'low hanging fruit' and an 'easy win'. Obviously market participants need to trust in the integrity of the market prices and I think the firm in question made it obvious what they were doing. I'm skeptical that the SEC will catch the 'big boys' who are a heck of a lot better at covering their tracks. [1] See the auction section of the Wikipedia page here: http://en.m.wikipedia.org/wiki/Shill http://en.m.wikipedia.org/wiki/Shill