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Comment by gamblor956 | Hacker News Reader

I heard that story from a quant friend. However, the way I heard the story, the targeted firm found out about their rival's attempt to game their strategy, and faked a bunch of activity. The rival's algorithm acted on the activity and placed a large market order...in the wrong direction.

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This is called spoofing and is illegal.

From a place of total ignorance, why would telegraphing a particular false strategy to your competitor in order to get them to respond in a way that is profitable to you be illegal?

Also, how would you ever prove it?

Because you’re not just telegraphing it to your competitor, you’re moving the entire market and affecting the bid/ask and price transparency for all its participants. That affects liquidity, derivatives, a lot of downstream negatives.

That said, there are narrow instances where you can place less-than-real orders in a market [0]... it just has to be a market that is nearly and completely illiquid.

[0] https://www.bloomberg.com/opinion/articles/2018-12-04/trying...

No it isn't, spoofing is feigning trading behaviour.

Providing data that another company illegitimately bases their trades on isn't trading.

Yes it is. Placing orders you don't intend to be executed is spoofing. From the OP: "faked a bunch of activity"

I assume they mean phone network activity, not market trading activity.

Sorry, should have been more specific. As I understand it, no trades were made--they just spoofed whatever activity their competitor was looking at, so it wasn't illegal (but then again, I was hearing the story second-hand).

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