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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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