Is Latency Arbitrage Considered Illegal Market Manipulation by US Regulators? ⎊ Path

Is Latency Arbitrage Considered Illegal Market Manipulation by US Regulators?

Generally, latency arbitrage is not considered illegal market manipulation. It is viewed as a competitive, high-speed trading strategy that exploits temporary price discrepancies across different venues, which is a feature of fragmented markets.

However, if the strategy involves deceptive practices like "spoofing" or "layering" to create the price discrepancy, it crosses the line into illegal manipulation under rules enforced by the SEC and CFTC.

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Glossar

Illegal Market Manipulation

Manipulation ⎊ Illegal Market Manipulation involves deceptive practices intended to artificially control or influence the price or trading volume of a financial instrument, including crypto assets and derivatives, in violation of established securities and commodities laws.