An illegal practice that involves placing a quote that would be canceled prior to its execution. The happens when a trader places an order that he/ she doesn’t intend to execute. Motivations behind such practices include creation of fake liquidity (by rapidly placing and canceling an order- the same order; this is known as strobing), creation of a false market depth or direction (layering: placing and then canceling multiple bids/ offers), overloading the quotation system of an exchange (a disruptive manipulation known as quote stuffing), etc.
Spoofing results in an intentional distortion of the order books and gives a false image about the supply and demand in a given market, and therefore impacts prices in an artificial way.
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