Gideon Mark, U Maryland
Spoofing and Layering
This Article examines a broad range of issues associated with spoofing and layering in the futures and securities markets and proposes a set of recommendations to resolve them. Spoofing and layering are forms of market manipulation whereby traders place orders with no intent to execute, primarily to deceive other traders as to the true levels of supply or demand. While the terms are sometimes used interchangeably, layering is best understood as a sophisticated permutation of spoofing, in which traders place multiple trade orders at multiple price tiers, with no intent to execute. Spoofing was expressly prohibited by an amendment of the Commodity Exchange Act in 2010 and such conduct is proscribed—albeit not expressly—by the federal securities laws. Regulatory and criminal anti-spoofing enforcement has sharply accelerated in the last few years. That enforcement has spawned numerous novel unresolved issues which are addressed herein.