Quote Stuffing

DEFINITION of 'Quote Stuffing'

A tactic of quickly entering and withdrawing large orders in an attempt to flood the market with quotes that competitors have to process, thus causing them to lose their competitive edge in high frequency trading. This tactic is made possible by high-frequency trading programs that can execute market actions with incredible speed. Only market makers and other large players in the market are capable of executing these tactics, since they require a direct link to the exchange in order to be effective.

BREAKING DOWN 'Quote Stuffing'

The U.S. Securities and Exchange Commission is investigating the extent to which high frequency trading should be allowed in U.S. markets. The May 6, 2010 "flash crash" brought greater scrutiny to these tactics, even though regulators later concluded that they were not the cause of the pricing anomalies.