High-frequency spoofing, market fairness and regulation

Daniel Ladley, Nathalie Oriol and Iryna Veryzhenko ()
Additional contact information
Daniel Ladley: University of Leicester
Nathalie Oriol: UNS - Université Nice Sophia Antipolis (1965 - 2019)
Iryna Veryzhenko: LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - Cnam - Conservatoire National des Arts et Métiers [Cnam]

Working Papers from HAL

Abstract: Recent years have seen a number of cases of spoofing subjected to criminal prosecution by market authorities. In an artificial market setting, we study the feedback loop created between spoofing strategies and market dynamics. We analyze the impact on market quality and fairness and test regulatory measures to discourage market manipulation. Our results show that spoofing does not significantly affect market quality measures, but by inducing losses for other traders, it affects fairness. In addition, we show that spoofers are particularly attracted to uncertain environments (macroeconomic announcements) and high- capitalization, liquid securities. Finally, we find that introduction of a random market order execution delay is an effective way to make spoofing unprofitable and enhance market integrity.

Keywords: market manipulation; spoofing; high-frequency trading; market regulation; market quality; market fairness; agent-based modeling (search for similar items in EconPapers)
Date: 2024-01-22
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-04409485

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().