[kome]

Sending out orders and withdrawing them immediately after is market abuse, there is a regulation in Europe against it (MIFID II): the real question about the "whole lot of undesirable consequences" is, to whom? and who would benefit instead?

The truth is that the real effects of algo trading are still poorly understood as a system, and they have been able to crash markets a couple of time in the past, for no reason. Do we really need this form of speculation "because liquidity"?

[logicchains]

>sending out orders and withdrawing them immediately after is market abuse

It's abuse if it's done for the purpose of manipulating the market (spoofing) or deliberately to slow it (quote stuffing), but not if it just happens because somebody put in a bunch of orders and then realised their mistake.

>"a whole lot of undesirable consequences" is, to whom

To all the institutional and retail traders on the exchange, who have to pay worse prices for their trades because the market makers can't quote so tightly.

[GordonS]

> but not if it just happens because somebody put in a bunch of orders and then realised their mistake.

Surely that would be an occasion thing though, not several times a second for a prolonged time?

I can see how throttling of some kind could work, as long as it's not too aggressive.

[nv-vn]

Market makers routinely have to adjust their quotes as the price moves. If they set a price and then the market moves significantly, the price will soon be incorrect. If they leave the order on the book then they might get undesirable fills (losing money) or it might just sit there and never get executed because their price is worse than what the market is offering. In either case, it's useful for them to be able to adjust their quotes by cancelling previous quotes that are not up to date with the latest information.

Imagine if every time you go to the gas station and see the big price for a gallon you write it down. Should the gas station still have to offer you the lowest price over the past {day,week,month} if the price has gone up? "Cancelling" orders is this same idea of changing the offer, only at a much smaller time scale because markets trade extremely fast.

[quickthrowman]

It’s not abuse if you’re trying to get your order filled. I make and immediately cancel orders frequently, simply to get a fill. Derivative prices move fast