How to Protect Yourself from Quote Stuffing

But first…

What is quote stuffing?

In the trade and finance set up, ‘quote stuffing’ is a term used to denote a strategy of quickly entering and sudden withdrawing of large orders with the aim of flooding the trading markets with quotes that other competitors are forced to compete with. This causes a lot of flurry and confusion for high -speed traders and in the bargain, they end up losing their competitive edge.

Through the process of quote stuffing, computerized trading platforms delay the quotes while the quote stuffing is taking place, by simply placing and canceling bulk orders at prices that exceed the prescribed norms of the market data feed. This process is only possible due to the entry of high- frequency trading platforms which conduct and perform all the market actions with great speed and alertness.

When traders turn fraudulent and use algorithmic trading tools, quote stuffing occurs. Big players and others who have a firm market hold are the influential links who have direct contacts with the trading exchanges, to be able to carry this out.

Protection from quote stuffing

Though quote stuffing is considered illegal and unethical in trading practices, there are many traders who still manipulated the market and will continue doing so in the future also. The only way to stay safe and protected from such manipulations is to first be able to identify such orders and quotes and second is not to react to them.

This is easier said than done as in today’s world of technological advancements, computerized trading systems and advanced software and applications make it easier for manipulating the market.

Identifying this messaging pattern which is slyly designed to jeopardize smooth market operations by the entry of latent and high bids which need to be taking up for exchange, is not only difficult, it needs an experienced eye and a lot of skill too. This process is an unethical way which catches many unknowing and traditional traders on the wrong end and simply throws them off guard.

Several exchanges have intervened and have tried to put an end to quote stuffing by banning defaulters and also by putting a limit on the number of transactions per second that one can submit. Trading with such exchanges is another way to protect yourself from quote stuffing.

Conclusion

The best way to stay protected from Quote stuffing and other market manipulations is to identify and understand the process of manipulation and identify when it is taking place and then developing skills to be able to avoid being a victim of them. Also, you could take help of professional apps like Fincrowd app, which is specially designed to help traders keep to keep a track off and check on their transactions.

Declan Stewart

Author: Declan Stewart

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