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Is Spoofing alive and well?

  #6 (permalink)

New York, NY
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xplorer View Post
In particular, I seem to observe much more frequently what to the general 'trader' population would look like aggressive spoofing. Almost as if a new liquidity provider was added to the mix, or an existing one changed tactics, or some hedge fund perhaps.

I actually don't see a clear case of spoofing activity in the video you posted. This looks like a simplistic market making model to me. I don't know the exact time you're posting and can look into this further on my side if you want, but I'm guessing there's about 40+ size behind 1 order on each side away from BBO. That's not really enough size to put a blip if you're spoofing, and usually you'd see asymmetric size in the classic spoofing strategy.

There's many reasons that they could seem like they are 'enveloping' the midprice outside BBO and I can't speculate all of them. I can mention a few anecdotal examples where I had rolled out something similar before though. The first being that you're trying to roll out a new strategy and want to visualize what it's doing in live trading, maybe you don't have the tools to back out your order from the book easily and you just want enough (unique) size on it that you can see it or distinguish immediately for quick feedback. You would also back away from BBO to minimize the risk of fill in this case. Other cases are that your vol estimate is high or you have a correlated position and so you don't actually want to be filled, and there's still value in leaving your order there for queue position later on.

xplorer View Post
Is spoofing alive and well?

Yes, but CME in particular has been increasingly aggressive in going after them.

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