Quote Stuffing

Quote Stuffing is a high-frequency trading tactic that involves placing a large number of buy or sell orders with the intent to cancel them almost immediately. This practice creates a misleading impression of market activity and can influence the pricing of Securities.

By flooding the market with quotes, traders aim to manipulate Stock prices and create confusion, potentially benefiting from the resultant market volatility.

Examples:

• A trader places thousands of orders for a particular Stock, driving up its price momentarily, only to cancel the orders before execution.
• A firm may use quote stuffing to create a false sense of demand for a security, which can trick other traders into making unfavorable trades.

Cases:

• In 2010, the SEC charged a trader for engaging in quote stuffing as part of a scheme to manipulate Stock prices, leading to significant fines and sanctions.
• A notable case involved a major Financial Institution bEINg penalized for using quote stuffing tactics that disrupted market stability, highlighting the regulatory crackdown on such practices.