Ever heard of spoofing? If you have been trading for a while, you must have come across this term. Spoofing is mostly done in the commodity futures market. Spoofing is a disruptive algorithmic trading entity employed by traders to outpace other market participants and to manipulate commodity markets. Spoofing techniques have evolved over the years.
When Bragança took day trader Stanley Awdisho to court for spoofing some 15 years ago, the practice, also known as a “pull and hit,” was little-known, and the term spoofing rarely used. But with the advent of high-speed trading technology, it’s become more prominent, and regulators are starting to take note. Watch the video below!
Spoofing might have crashed the market.
Spoofing can be disruptive for the markets. Spoofers place a big order in the market bluffing the market that the price is going up or down. Then immediately they cancel the order and place a small order. So in essence what the spoofers are doing is undermining the confidence of other traders and investors in the market. Now the regulators are taking note of this spoofing activity as it reduces the confidence of traders and investors in the market. These 5 things you should know about spoofing.
Markets have become computerized. Electronic trading gives the cheaters speed and sophistication which was not available before. Catching spoofers is not an easy task. In this Bloomberg article, authors explains how to catch spoofers.