Quote Stuffing

AAA

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.

RELATED TERMS
  1. Flash Trading

    A controversial computerized trading practice offered by some ...
  2. High-Frequency Trading - HFT

    A program trading platform that uses powerful computers to transact ...
  3. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  4. Quant Fund

    An investment fund that selects securities based on quantitative ...
  5. New York Stock Exchange - NYSE

    A stock exchange based in New York City, which is considered ...
  6. Clowngrade

    An upgrade or downgrade of a security for reasons considered ...
Related Articles
  1. Options & Futures

    Quant Strategies - Are They For You?

    Using the power of modern computers and the input of many financial experts, these models automatically execute trades for you.
  2. Professionals

    Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.
  3. Fundamental Analysis

    Quantitative Analysis Of Hedge Funds

    Hedge fund analysis requires more than just the metrics used to analyze mutual funds.
  4. Options & Futures

    A Brief History Of The Hedge Fund

    Find out how this U.S.-born investment innovation became a $1-trillion industry that's both praised and vilified by the media.
  5. Professionals

    Preparing For A Career As A Portfolio Manager

    Find out what it takes to win a spot in one of the most coveted financial careers.
  6. Brokers

    Broker-Dealer Industry 101: The Landscape

    Independent broker-dealers are a great choice for experienced, self-starter planners who have established practices.
  7. Investing Basics

    5 Things to "Deliberately" Do to Improve Your Trading

    Most traders are putting in trading hours, but not improving. Here are deliberate steps that can take your trading to the next level.
  8. Chart Advisor

    Stocks to Short...When the Dust Settles

    Four short trades to consider, but not quite yet. Let the dust settle and wait for a pullback to resistance for a higher probability trade.
  9. Stock Analysis

    Benefits of Regional Bank ETFs over Commercial Banks

    The SPDR S&P Regional Banking ETF offers a stable local alternative to broad-based multinational commercial banking sector funds.
  10. Brokers

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
RELATED FAQS
  1. How reliable is the Fibonacci retracement in predicting stock behavior?

    The use of the Fibonacci retracement is subjective. There is no objective method to verify one application of the Fibonacci ... Read Full Answer >>
  2. How can a swing trader use a Fibonacci retracement?

    Swing traders can use the Fibonacci retracement to determine levels of support and resistance for a price on a chart, as ... Read Full Answer >>
  3. What is the interest rate offered on a typical margin account?

    Interest rates on margin accounts vary according to the size of the loan and the brokerage firm being used. Generally, interest ... Read Full Answer >>
  4. How does a swing trader use the stochastic oscillator?

    The stochastic oscillator is a momentum technical indicator used to indicate points of possible price reversals. Swing traders ... Read Full Answer >>
  5. What is the cost of a share purchase?

    When investors purchase shares of stock, the price paid includes two components: the price of the stock and the fee charged ... Read Full Answer >>
  6. What is the difference between fee-based advisors and commission-based advisors?

    The difference between a fee-based adviser and a commission-based adviser is that the former collects a flat fee for investment ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!