Layering is a trading practice that involves the submission of multiple orders on one side of the order book - say, buy orders - to create the impression of liquidity in a stock or other trading instrument when the trader's actual intention is ultimately to trade in the opposite direction. The trader then quickly cancels or withdraws the orders, and then makes real trades if prices have moved to the trader's advantage.
FinTech firm Trillium offers this definition:
Layering is the act of placing multiple visible non-bona fide orders with the intent of creating a false impression of supply or demand, thereby pushing market prices to levels at which the participant can obtain opposite-side executions at more favorable prices than would have otherwise been possible.
Also See: "spoofing"
- ↑ UK watchdog warns on 'spoofing'. The Financial Times.
- ↑ What is Layering?. Trillium.