Quote stuffing

Article on “Quote stuffing” in Financial Management by Egginton et al.

Abstract:

This study examines intense episodic spikes in quoting activity (frequently referred to as quote stuffing) on market conditions. We find that quote stuffing is pervasive and that over 74% of U.S. exchange listed securities experience at least one episode during 2010. We find that stocks experience decreased liquidity, higher trading costs, and increased short-term volatility during periods of intense quoting activity. We find that most quote stuffing events occur on the NYSE, ARCA, NASDAQ and BATS and that during these quote stuffing events the number of new orders and cancelled orders increases substantially while the order size and order duration decrease.

Link to paper