High Frequency Trading and Quote Stuffing
Posted by Jeff Wells on Mon, Sep 13, 2010
I am sure that we all have noted the recent noise around Quote Stuffing. What I am surprised about is that none of the articles or stories have touched on the why someone might be stuffing.
http://online.wsj.com/article/SB10001424052748703882304575465990082237642.html?KEYWORDS=stuffing
Imagine if you had the ability to filter out your quotes, or more specifically any quotes more than a certain amount away from the inside. White Hat traders are probably already filtering like this. Black Hat traders might then stuff the system with tens of thousands of irrelevant quotes. This would have the effect of bogging people’s ticker plants and systems down, while their filtration allowed you to focus on the real quotes.
In the good old days a floor manager would have dealt with bad quoters, and if they didn’t, there were always some big burley traders who could take care of business.
Luckily today, you just need a decent system and logic to be able to play a White Hat defense and no blood is spilt.