In this study we examine intense episodic spikes in quoting activity (frequently referred to as quote stuffing) on market conditions.
Quote stuffing is the practice where a large number of orders to buy or sell securities are placed and then canceled almost immediately.
Although quote stuffing is often linked to high-frequency trading (HFT), smart order routers and other algorithmic traders, who are not high-frequency traders, may also be quote stuffing.
Much of the difficulty comes not from transactions themselves but from "quote stuffing
", where high-frequency traders make and withdraw thousands of bids, probing for information without actually making transactions.
But analysts say "quote stuffing" is to blame for many phantom bids.
Quote stuffing Placing and quickly rescinding a large number of buy or sell orders to confuse or slow down rival traders.
The ultimate aim is to discourage abusive practices, such as quote stuffing
, which consists of placing orders at incredible speed (ie thousands per second) to disrupt the working of the market and thus gain an advantage.
Practices such as 'quote stuffing
', a method whereby a trader places very large numbers of quotes in a short space of time, forcing the IT systems of other market participants to slow down as they process the quotes, have brought low-latency trading under further scrutiny.
That will include "quote stuffing
" -- flooding the market with large numbers of rapid-fire orders and then cancelling them almost immediately -- a practice that some have argued contributed to the May 6 stock market "flash crash."
Finance Watch highlights the need to set higher fee structures so as to put a price tag on orders that are changed or cancelled, with a view to preventing abusive practices like quote stuffing
In her speech, Schapiro also acknowledged worries about the role of high-frequency traders, in particular, the practice of quote stuffing