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Detecting Multilevel Manipulation from Limit Order Book via Cascaded Contrastive Representation Learning

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  • Yushi Lin
  • Peng Yang

Abstract

Trade-based manipulation (TBM) undermines the fairness and stability of financial markets drastically. Spoofing, one of the most covert and deceptive TBM strategies, exhibits complex anomaly patterns across multilevel prices, while often being simplified as a single-level manipulation. These patterns are usually concealed within the rich, hierarchical information of the Limit Order Book (LOB), which is challenging to leverage due to high dimensionality and noise. To address this, we propose a representation learning framework combining a cascaded LOB representation architecture with supervised contrastive learning. Extensive experiments demonstrate that our framework consistently improves detection performance across diverse models, with Transformer-based architectures achieving state-of-the-art results. In addition, we conduct systematic analyses and ablation studies to investigate multilevel manipulation and the contributions of key components for detection, offering broader insights into representation learning and anomaly detection for complex time series data.

Suggested Citation

  • Yushi Lin & Peng Yang, 2025. "Detecting Multilevel Manipulation from Limit Order Book via Cascaded Contrastive Representation Learning," Papers 2508.17086, arXiv.org, revised Oct 2025.
  • Handle: RePEc:arx:papers:2508.17086
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    References listed on IDEAS

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    1. Thierry Foucault & Ohad Kadan & Eugene Kandel, 2005. "Limit Order Book as a Market for Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1171-1217.
    2. Álvaro Cartea & Sebastian Jaimungal & Yixuan Wang, 2020. "Spoofing and Price Manipulation in Order-Driven Markets," Applied Mathematical Finance, Taylor & Francis Journals, vol. 27(1-2), pages 67-98, July.
    3. Xiaofei Lu & Frédéric Abergel, 2018. "High-dimensional Hawkes processes for limit order books: modelling, empirical analysis and numerical calibration," Quantitative Finance, Taylor & Francis Journals, vol. 18(2), pages 249-264, February.
    4. Gu, Gao-Feng & Xiong, Xiong & Zhang, Yong-Jie & Chen, Wei & Zhang, Wei & Zhou, Wei-Xing, 2016. "Stylized facts of price gaps in limit order books," Chaos, Solitons & Fractals, Elsevier, vol. 88(C), pages 48-58.
    5. Xuan Tao & Andrew Day & Lan Ling & Samuel Drapeau, 2022. "On detecting spoofing strategies in high-frequency trading," Quantitative Finance, Taylor & Francis Journals, vol. 22(8), pages 1405-1425, August.
    6. Xiaofei Lu & Frédéric Abergel, 2018. "High dimensional Hawkes processes for limit order books Modelling, empirical analysis and numerical calibration," Post-Print hal-01686122, HAL.
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