What is quote stuffing?

According to MAR's Commission Delegated Regulation (EU) 2016/522 of 17/Dec/2015, quote stuffing is the practice of entering large number of orders messages (entry, modifications and cancellations) so as to create uncertainty for other participants, slowing down their process and/or to camouflage their own strategy. 

Note that quote stuffing is frequently referred in the market as the practice of entering orders messages in large numbers so as to slowdown the exchange’s trading system – which differs from the MAR definition.

Who quote stuffs?

Quote stuffing is done by HFT with the goal of confounding and slowing down other HFT (which have to process a large number of messages, while the manipulator does not – since he/she sent them), in order to:

• Buy and/or sell at more favorable terms;
• Exploit arbitrage opportunities (between the underlying security and respective derivative or index); or
• Camouflage other ongoing manipulative practices.

Which market conditions?

Quote stuffing is more prone to occur in fairly liquid securities, but I guess it can also can occur in less liquid markets.


Example 1

• Recall that: F = S x (1+Rf-Div)T
• If a participant starts selling the spot up to a point that it leads to a 0.2% fall in the spot price, the future becomes 0.2% overvalued in relation to the spot. At that moment, there is an arbitrage opportunity that can be captured by HFTs (who buy the undervalued spot and short the overvalued future – they can do it without risk).
• If, at that moment, the manipulator starts sending an enormous number of order messages, he/she/it can confound and slow down other HFT. This way, the manipulator may be able to gain time to capture a larger share of the existing arbitrage opportunities.

Example 2

• The manipulator quote stuffs the entire book (grey) so that his/her spoofing strategy (green) is less noticed and/or under-stood by other participants and by the NCAs.
• If the manipulator does a pure spoofing with no other order in the book, the other participants and the NCAs will likely under-stand.