[blancheneige]

I don't see anything fundamentally wrong with spoofing. If you really mean your market order then you don't care about whether resting orders are bluffing, unless you're bluffing yourself. You'll be matched against the best available bid/ask before these can be causally removed, period.

[1e-9]

It's fundamentally wrong because markets exist to facilitate the efficient exchange of assets and spoofing lowers this efficiency. More specifically, spoofing tricks others into thinking that their transaction costs will be higher or lower than reality. This causes participants to transact at unnecessarily bad prices, which damages the price discovery process and adds cost.

[blancheneige]

>More specifically, spoofing tricks others into thinking that their transaction costs will be higher or lower than reality.

How so? If you want to market buy 100 shares at time t and the "spoofed" limit order is up at time t, you will buy into the spoofed order. Only if the spoofer somehow has knowledge of your intention to buy at time t and quickly pulls the rug from under your feet at time t-t1, where t1 would have to be an unrealistically small amount of time, can they mess with you. So clearly this argument against spoofing, i.e. that it's creating a false sense of liquidity, doesn't work in an environment when the quote can flicker dozens of time per millisecond.

It's more likely that spoofing is used to, say, protect a margin position from liquidation by flashing a wall above/below it hoping to scare away other market participants. In which case it shows the latter don't really mean their move to begin with, or that they are merely trading to squeeze gains on short timeframe, which has hardly anything to do with "facilitating the efficient exchange of assets".

[baybal2]

Can somebody with a better knowledge of American securities law tell what is an actual charge for that "spoofing"?

"Placing a trading position with a sole purpose to benefit an another existing trading position" — sounds exactly what most of day trading is.

[1e-9]

Spoofing is the act of placing an order with the intent to cancel it before execution.

[erik_seaberg]

If Burger King puts up a "5¢ Whoppers Today" sign but takes it down when you reach the door, that's not a bluff, that's fraud.

[blancheneige]

>but takes it down when you reach the door

like I said, your market order will be executed before the alleged spoofer can take his down, i.e. there is no way for him to react and cancel his limit order causally, unless you are yourself doing something fishy prior to that market order. so no, the analogy doesn't hold. it really is an insignificant thing outside of HFT which is speculation to the max anyway.

[tigershark]

You look at the market depth to get a feel where the market is moving. And spoofing modifies the sizes at certain price levels.

[blancheneige]

This is like saying we'll allow you to play poker but you can't bluff.