According to MAR's Commission Delegated Regulation (EU) 2016/522 of 17/Dec/2015, smoking is posting orders to trade, to attract other market participants employing traditional trading techniques (‘slow traders’), that are then rapidly revised onto less generous terms, hoping to execute profitably against the incoming flow of ‘slow traders’ orders to trade.
Does smoking exist?
I am not sure how often smoking happens nor how easy it is to do… It actually seems quite hard to get the timings right… Thus, I end up questioning myself: does anyone actually do smoking? Or is it something that looks well on paper but does not happen in practice?
Who can smoke (assuming that smoking exists)?
The manipulators are high-frequency traders, trying to make a profit out of slow traders.
We are talking about a form of market manipulation that is really fast and leads to tiny profits (therefore, frequency is necessary for the smoker to make relevant gains).
The manipulators are high-frequency traders, trying to make a profit out of slow traders.
We are talking about a form of market manipulation that is really fast and leads to tiny profits (therefore, frequency is necessary for the smoker to make relevant gains).
Which market conditions?
I guess the market needs to have some liquidity (as the technique involves attracting participants to enter orders), but it cannot be too liquid since, in such case, the original orders would likely be immediately executed (against other HFT).
Example
Not sure how often this happens nor how easy it is do… It actually seems quite hard to get the timings right… The original order needs to stay in the book time enough for a slow trader to see it and act on it, and the manipulator has to, coincidentally, immediately before that moment, modify his/her order. That is why I ask: does smoking really exist?
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