What is quote stuffing?
This is a tactic used by high-frequency traders. It involves overwhelming the market with huge numbers of quotes at the same time in order to create confusion and slow down competitors.
Where have you heard about quote stuffing?
It’s a relatively new phrase first put forward by the data analysis firm Nanex in 2010. Nanex coined the phrase in a study on the 2010 Flash Crash on the US stock market in May that year.
What you need to know about quote stuffing.
It can only be carried out by big market players, such as market makers. This is because it requires a direct link to an exchange to be effective. The traders will place and then almost immediately cancel large numbers of orders to buy or sell stocks. By doing this, they can confuse rival traders into thinking there is a large amount of activity on a particular stock. It can also slow down orders of that stocks because it delays quotes and causes a backlog in the system.