Spoofing
Market Microstructure glossary · High Frequency Dynamics & Latency Arbitrage
Definition
Placing and then rapidly canceling large orders to create a false impression of supply or demand. Illegal under the Dodd-Frank Act.
Spoofing in plain English
Spoofing is a form of market cheating where a trader places big fake orders they never intend to complete, just to trick everyone else about how much demand or supply exists. For example, flooding the screen with huge 'buy' orders makes the stock look hot, nudging others to buy and pushing the price up — then the spoofer cancels their fakes and quietly sells at the inflated price. It's the trading version of a fake auction bid you yank back the second someone else raises their hand. It's illegal in the U.S. under the Dodd-Frank Act.
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