Quote stuffing

Definition

entering large number of orders to trade and/or cancellations and/or updates to orders to trade so as to create uncertainty for other participants, slowing down their process and/or to camouflage their own strategy

Surveillance

Effective implementation of surveillance alerts for quote stuffing requires capturing the following trade data:

  • trade data

  • order and quote data including unexecuted quotes and orders

Order to trade ratios is one of the indicators used in surveillance alerts for quote stuffing. To increase effectiveness of detective alerts, the ratio should measure intra-day rate and its variability to detect unusual bursts of messages send to venues.

Reference

Flash Boys

A fascinating story of high frequency traders and some of their methods used to gain advantage over slow traders. The Times, Observer, Financial Times, New Statesman and Times Literary Supplement Books of the Year 2014

Regulatory source

Entering large number of orders to trade and/or cancellations and/or updates to orders to trade so as to create uncertainty for other participants, slowing down their process and/or to camouflage their own strategy — usually known as ‘quote stuffing’;

COMMISSION DELEGATED REGULATION (EU) 2016/522, Annex II, Section I, 4 (e)