What Are ‘Spoofing’ and ‘Layering’ and Why Are They Considered Market Manipulation?

Spoofing is placing a large, non-bonafide order with the intent to cancel it before execution, creating a false impression of supply or demand. Layering is a form of spoofing where multiple non-bonafide orders are placed at different price levels.

Both are manipulative because they trick other traders into executing trades at prices they wouldn't otherwise, by artificially influencing the order book depth and bid-ask spread. This can lead to significant negative slippage for the manipulated party.