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Spoofing and Pinging in Foreign Exchange Markets

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  • Alexis Stenfors

    (University of Portsmouth)

  • Masayuki Susai

    (Nagasaki University)

Abstract

This paper investigates the susceptibility of FX spot markets to limit order submission strategies that are either intended to create a false impression of the state of the market ('spoof orders') or to extract hidden information in the market ('ping orders'). Using a complete limit order book dataset from EBS, we study currency pairs that have mature algorithmic markets (EUR/USD and USD/JPY), as well as other G10 and emerging market currencies where EBS is used as a secondary electronic trading platform (EUR/SEK, USD/RUB and USD/TRY). Our results, indicating that EUR/USD and USD/JPY are highly sensitive to information-rich orders, suggests that spoofing tactics might be more dependent on the chosen electronic trading venue, rather than the overall market liquidity of the currency pairs. Furthermore, we find widespread adoption of pinging tactics in the EUR/SEK and USD/RUB markets.

Suggested Citation

  • Alexis Stenfors & Masayuki Susai, 2018. "Spoofing and Pinging in Foreign Exchange Markets," Working Papers in Economics & Finance 2018-05, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    • Handle: RePEc:pbs:ecofin:2018-05
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    Cited by:

    1. Stenfors, Alexis & Doraghi, Mehrdaad & Soviany, Cristina & Susai, Masayuki & Vakili, Kaveh, 2023. "Cross-market spoofing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    2. Alexis Stenfors & Masayuki Susai, 2021. "Stealth Trading in FX Markets," Working Papers in Economics & Finance 2021-02, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    3. Alexis Stenfors & Kaveesha Dilshani & Andy Guo & Peter Mere, 2023. "A Model to Quantify the Risk of Cross-Product Manipulation: Evidence from the European Government Bond Futures Market," Working Papers in Economics & Finance 2023-06, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    4. Alexis Stenfors & Lilian Muchimba, 2023. "The Anatomy of Three Scandals: Conspiracies, Beauty Contests, and Sabotage in OTC Markets," Journal of Economic Issues, Taylor & Francis Journals, vol. 57(2), pages 538-545, April.

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    More about this item

    Keywords

    market microstructure; limit order book; foreign exchange; high-frequency trading; manipulation; spoofing; pinging; stealth trading;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F3 - International Economics - - International Finance

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