Spoofing & layering

Published on March 23, 2021 by Market Abuse Centre

Both ‘spoofing’ and ‘layering’ are strategies to manipulate a market. Both schemes, techniques or strategies are prohibited. Basically, the underlying technique involves the placing of orders without the intention to have these orders executed. That, in itself, is not allowed. After all, any order should be submitted with the intention to have it executed.

 

Spoofing and layering both refer to the issuing by a market participant of one large non-genuine order or multiple non-genuine orders to trade which are placed on one side of the order book, in order to enter into one or multiple transactions on the other side of the order book.

 

Basically, both spoofing and layering aim to simulate a trend in the market. In other words, the schems are applied to generate the false impression as if the market faces a trend, either up, down or sideways. Hence, spoofing and layering schemes are applied to create a ghost trend. The illegal strategies are applied to do as if there is a certain appetite, which actually there is not. The false impression is created to attract other market participants and to provoke them so that they get involved on this basis.

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