What Data Points Are Most Critical for a Surveillance System to Detect “Spoofing”?

Spoofing is the practice of placing large, non-bonafide limit orders (bids or offers) to mislead other traders about supply or demand, and then canceling them just before execution. Critical data points for detection include the ratio of orders canceled to orders executed , the time duration the orders were active, the distance of the orders from the best bid/offer , and the account's subsequent trading activity after the cancellation.

High cancellation rates far from the market are key flags.