Spoofing and the Flash Crash – Six Things You Need to Know


What exactly is “spoofing?” And what have we learned since the Flash Crash and the recent indictment of a UK Futures trader? Here are six takeaways from the controversy and what it means for regulators and buy side traders.



Charges against a UK futures trader accused of manipulating the U.S. futures markets has ignited debate on whether “spoofing” was a contributing factor in the 2010 Flash Crash in U.S. stocks. In the entertainment field, you often watch a spoof on Saturday Night Live, but the consequences are usually innocuous.

In computerized financial markets, spoofing generates a lot of “noise” in the market, and can be far from innocuous. It’s meant to trick market participants into trading based on quotes that, while actionable, are designed to move the market in a direction favorable to the spoofer.

But what exactly is “spoofing?” And what have we learned since the Flash Crash and the recent indictment of the UK futures trader?

Here are six takeaways from the controversy and what it means for regulators and buy side traders:

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