Yes I have heard of the SOES Bandits. They gave rise to one of the largest automatic order-matching ECN Island which is what I think how exchanges should work.
They are also known to have screwed the market makers at their own game, using their (ie. MM's) own algo, which was SOES at that time. I bring this up because of the correlation you imply between wide spread vs liquidity. Eventually, some smart dude(s) will come up with a creative way to screw the MMs (or HFTs nowadays) again like the SOES bandits. Then these MMs and HFTs will run crying to SEC and complain and the whole cycle will repeat again. It's always been like that, same story, different crap.
SOES was not the MM's algo. It was a system created out of a need to be able to send retail orders directly to the MM to be executed automatically without allowing MM's interference so to maintain an orderly market at all times. It was created due to MM's refusal to take phone calls during the Black Monday's crash in 1987 causing retail traders not being able to protect their portfolios further exacerbating their losses. As its name states, SOES is supposed to work only with small orders since those are the typical retail orders size but the SOES bandits took advantage of the system to send multiple small orders to profit at the MM's expense. So in a way MM's kinda brought this upon themselves. They shouldn't have refused to take phone orders during trying market times. I mean this is what they are there for, to make markets. Dunno why you are bringing this up. I never mentioned anything about spread or liquidity. But regardless somebody profiting from SOES shouldn't be the reason for not ensuring fair dealing. Not even sure why and how SOES is related to this sudden spike-up of prices within the last 10 minutes of trading. Are you implying that this huge spike-up of prices within the last 10 minutes of trading is the doing of MM's? And since there were traders who used the SOES to "screw" MM's so it's justified that MM's can screw traders by manipulating prices to shake down retail positions?
My income depends on knowing where the orders are. This is trading 101. First thing a new trader is taught. No I will not demonstrate.
Yesterday was Russell rebalancing. It can cause big swings. Couple that with a asset rebalancings and you could have a very volatile close (with the market makers trying to exploit these flows). It happens all the time.