Spoofing becoming illegal
- Thread starter TraDaToR
- Start date
Even when the HFT guys try to provide the liquidity everyone claims is lacking, the critics make up some new term and redefine it to be illegal. You wonder why there's no liquidity? It's because you get investigated for providing it.
When you trying to buy 100 shares, posted at offer at their price and it dissappear by the time your order can reach this exchange(along with few other price levels that WAS in the book)-I call this a BS, not 'providing liquidity'
Maybe we have different problems Bob, but to be clear, immediately pulling an order ("spoofing") is different and in some ways more objectionable to my mind than placing big orders for some time ("layering") . I'd love to see someone "layering" a stock I wanted to buy or sell - those big orders really do provide liquidity, even if at a couple ticks away from the BBO, and I would be happy to pay that spread for getting a big fill in some less liquid names.
I also don't know how anyone could tell the difference between "layering" and placing limit orders based on a fair value model that said the stock needed to fall a bit before you wanted to buy it. Oh yeah, if they don't like you it's layering but if you're a value investor and not a HFT firm, it's called providing liquidity.
I also don't know how anyone could tell the difference between "layering" and placing limit orders based on a fair value model that said the stock needed to fall a bit before you wanted to buy it. Oh yeah, if they don't like you it's layering but if you're a value investor and not a HFT firm, it's called providing liquidity.
This is what HF traders do. It's called quote stuffing. It's designed to sniff out buyers and sellers by showing many fake bids/offers.
HF traders justify this by saying they give price improvements.
Not sure who benefits.
HF traders justify this by saying they give price improvements.
Not sure who benefits.
Quote stuffing and spoofing imply different, but related, intentions, although they can certainly take place simultaneously. Quote stuffing is flooding the feeds with many (even thousands or millions a second) trivial quote updates to bring the feeds (especially the consolidated feeds/SIPs used by non-HFT's) to their knees, not necessarily trying to create the perception of intention. Spoofing, in contrast, is all about creating perception of intention, regardless of the order placement rate, although the spoofer probably wants to cancel before too long because they surely don't want to get filled.
Both of these abuses would be a lot more difficult to pull off if there were a minimum resting period, even just a second, for orders that want to be displayed as the NBBO. A minimum resting period would make spoofing far more dangerous (spoofer: "oops I got filled on my spoof and now I'm bankrupt...") and quote stuffing nearly impossible (again unless the "stuffer" was willing to risk exposure to getting massively filled unintentionally).