[Normati]

It's hard to understand why spoofing would be illegal. If it fools traders who are relying on buy orders to judge the price, then why don't those traders just accept spoofing exists and not rely so heavily on the unfilled buy orders?

If it's illegal to cancel a buy order immediately after placing it, then perhaps exchanges shouldn't provide that facility? Perhaps there's some legal reason you would immediately cancel an order, and this action somehow doesn't destabilize the market or screw over other traders?

[kasey_junk]

Spoofing is illegal mostly because we said it should be. The reason we as a community decided it should be, is that we like that the markets are very good at finding accurate prices and spoofing is specifically built to prevent that.

To your points:

- Spoofers impact all orders, buy and sell equally.

- All market participants rely on the market to judge price, that's how the markets work.

- Market makers, who spoofers are targeting, have already stopped relying on unfilled orders (or more specifically they've gotten more sophisticated about predicting spoofing). This is very expensive and that cost is being passed on to everyone else in the market place. The problem is, what else should they rely on to determine the fair price of a security other than supply and demand?

Finally, spoofing is not about when you cancel an order. There is nothing illegal or even objectionable about canceling an order immediately after placing it. Spoofers put in orders over a wide period of time and then pull them all at once. Even that isn't in itself illegal or even objectionable, it's their intent when they put the orders in the book that is illegal.