Course Content
What Is Spoofing in the Financial Markets?
Author: Joseph Young Spoofing is a form of market manipulation where a trader places fake buy or sell orders, never intending for them to get filled by the market. Spoofing is usually done using algorithms and bots in an attempt to manipulate the market and asset prices by creating a false sense of supply or demand. Spoofing is illegal across many major markets, including the United States and the United Kingdom.
What Is Spoofing in the Financial Markets?
About Lesson

Spoofing is illegal in the United States. The U.S. Commodity Futures Trading Commission (CFTC) is responsible for overseeing spoofing activities in the stock and commodities markets. 

In the U.S., spoofing is illegal under the Dodd-Frank Act of 2010 Section 747. The section says the CFTC can regulate an entity that:

demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or is, is of the character of, or is commonly known to the trade as, ‘spoofing’ (bidding or offering with the intent to cancel the bid or offer before execution).

It’s difficult to categorize canceled bids in the futures market as spoofing unless the action becomes highly repetitive. This is why regulators may also consider the intent behind the orders before they move to fine, charge, or inquire about potential spoofing behavior.

Other major financial markets, such as the U.K., also regulate spoofing. The Financial Conduct Authority (FCA) of the U.K. is permitted to fine traders and institutions responsible for spoofing.