US regulator, the Securities and Exchange Commission, charged two exchanges formerly owned by Direct Edge Holdings with failing to disclose how order types functioned on its exchanges, and for selectively providing such information only to certain HFT firms.

The case was prompted by an SEC whistleblower complaint filed in 2011 by market expert Haim Bodek, currently managing principal at Decimus Capital Markets.

Bodek, former head of Trading Machines (following stints with Goldman Sachs, UBS and others), exposed deceptive practices by certain high frequency trading firms and financial exchanges catering to them.

Speaking to Automated Trader, Bodek said: "The SEC showed that they could address complicated issues of market structure. This is probably the most sophisticated case they have done yet and they are ahead of the industry on this one."

However, the SEC order identified and anonymised two trading firms involved. Bodek declined to speculate on the names of the firms, but noted that the public should be concerned about who benefited from being let in on the inside track for special order types not disclosed to all market participants.

"We have peeled back the onion so people can see what the actual issues are, that is the good news," he said. Still, there may be far more revelations to come.

"These two firms were able to get away with this, and the industry could have done something back in 2012. Back then the industry was negligent and broken," he said. "This isn't about HFT being advantaged against the world, but these two firms that got an edge versus the world."

Bodek's law firm, Hagens Berman, also chimed in on the SEC announcement.

"This SEC action is the product of several years and hundreds of hours of careful analysis by our client, and an enormous job done by the SEC's Market Abuse Unit under Daniel Hawke," said Shayne Stevenson, partner and head of the whistleblower practice at Hagens Berman, in a written statement.

"Haim Bodek performed an incredible public service at great risk to himself. He is exactly the kind of person the SEC whistleblower program was established to attract," he added.

"This case and its outcome should serve as inspiration to other whistleblowers to report market manipulation and other fraudulent activities," Stevenson said. "After all he has been through and grief from self-serving detractors, this is Haim Bodek's well-deserved vindication."

Prior to this penalty, the largest fine ever levied against a stock exchange was $10 million against Nasdaq in May 2013 to settle civil charges stemming from mistakes made during Facebook's initial public offering in 2012.

In a statement, BATS Global Markets, which acquired Direct Edge in 2013, said that the SEC's enforcement action was "against legacy Direct Edge exchanges with respect to functionality that was implemented prior to the acquisition by BATS".

"The SEC does not allege that there was anything inherently inappropriate about the order type functionality. Rather, the SEC alleged that the price sliding functionality was not completely and accurately disclosed in Direct Edge's rules," the exchange added.