DEFINITION of ‘Quote Stuffing’
A tactic of quickly entering and withdrawing large orders in an attempt to flood the market with quotes that competitors have to process, thus causing them to lose their competitive edge in high frequency trading.
BREAKING DOWN ‘Quote Stuffing’
The tactic of stuffing is made possible by high-frequency trading programs that can execute market actions with incredible speed. However, high-frequency trading in and of itself is not illegal. Stuffing occurs when traders fraudulently use algorithmic trading tools. Only market makers and other large players in the market are capable of executing these tactics, since they require a direct link to the exchange in order to be effective.