Which practice involves placing orders in the system to create an illusion of supply or demand and then deleting prior to executing?

Which practice involves placing orders in the system to create an illusion of supply or demand and then deleting prior to executing?

• A. Parking
• B. Duties of securities dealers relating to clients
• C. Spoofing/layering
• D. Front-running/Parallel-running

Answer: (C)

Spoofing and layering describe the manipulation of the order book by placing large or strategic orders to create a false sense of demand or supply, then canceling them before they execute. The aim is to influence other traders and push the price in a favorable direction without actually entering into those trades. This distorts price discovery and undermines market integrity, which is why it’s treated as illegal in many markets. Other options describe different activities: parking would involve something related to orders or positions that isn’t about creating fake depth; duties of securities dealers relate to client interactions and regulatory obligations; front-running or parallel-running involves trading ahead of or alongside a client’s order, not creating deceptive depth by placing and canceling orders.

Spoofing and layering describe the manipulation of the order book by placing large or strategic orders to create a false sense of demand or supply, then canceling them before they execute. The aim is to influence other traders and push the price in a favorable direction without actually entering into those trades. This distorts price discovery and undermines market integrity, which is why it’s treated as illegal in many markets. Other options describe different activities: parking would involve something related to orders or positions that isn’t about creating fake depth; duties of securities dealers relate to client interactions and regulatory obligations; front-running or parallel-running involves trading ahead of or alongside a client’s order, not creating deceptive depth by placing and canceling orders.