What is Quote Stuffing?
How Does Quote Stuffing Work?
Let's say John Doe is a trader who owns 1,000 shares of Company XYZ in his personal account. He wants to make the price go up so he can sell the shares and make some . To do this, he places 500 different buy orders for the shares. Other traders' computer systems notice the orders, figure demand for the is going up, and place orders for their own clients, thereby snowballing the effect and bidding up the price of the stock.
This all happens in a matter of seconds, during which John cancels his 500 buy orders and then sells his 1,000 shares of Company XYZ stock for a tidy. He has just manipulated the stock by quote stuffing.
Why Does Quote Stuffing Matter?
Quote stuffing relies on traders who want to manipulate the; it also requires a computerized trading system. The large number of orders involved in quote stuffing can often freeze up trading systems and confuse computerized trading programs.