[bpodgursky]

Seriously. It seems like there are many very easy technical fix the markets could implement --

- hard-cap the number of cancellations a trader can order

- penalize traders if they have too many cancelled orders (delay further transactions)

- add a cost to cancellation

Why does this require police action? Is the exchange just using the police as a bulldog to avoid having to implement technical fixes for these problems?

[kasey_junk]

Most of those do exist on exchanges. The mechanics usually involve a fee attached with your fill ratio (ie the number of orders/number that actually trade).

The thing about spoofing is that it doesn't require tons of cancels. Done right it falls well within the bounds of normal trading ratios.

[phdp]

This would most likely have the effect of widening the bid/ask spread. Market makers wouldn't be able to react to changing conditions in the marketplace as quickly, and they would therefore set bid lower/ask higher than they would in a friction-free market.