Spoofing can be a factor in the rise and fall of the price of shares and can be very profitable to the spoofer who can time buying and selling based on this manipulation.
"[22] He employed the technique of dynamic layering, a form of market manipulation in which traders "place large sell orders for contracts" tied to the Standard & Poor's 500 Index.
[22] In July 2013 the US Commodity Futures Trading Commission (CFTC) and Britain's Financial Conduct Authority (FCA) brought a milestone case against spoofing which represents the first Dodd-Frank Act application.
[8] The illegal activity undertaken by Coscia and his firm took place in a six-week period from "August 8, 2011 through October 18, 2011 on CME Group’s Globex trading platform.
"[1] Britain's FCA is also fining Coscia and his firm approximately $900,000 for "taking advantage of the price movements generated by his layering strategy" relating to his market abuse activities on the ICE Futures Europe exchange.
"[1] On 18 April 2014 Robbins Geller Rudman & Dowd LLP filed a class-action lawsuit on behalf of the city of Providence, Rhode Island in Federal Court in the Southern District of New York.
The suit also names major Wall Street firms including but not limited to, Goldman Sachs, Citigroup, JPMorgan and the Bank of America.
"It is "against the law to spoof, or post requests to buy or sell futures, stocks and other products in financial markets without intending to actually follow through on those orders.
[7][2] On April 21, 2015, five years after the incident, the U.S. Department of Justice laid "22 criminal counts, including fraud and market manipulation"[20] against Navinder Singh Sarao, who became known as the Hounslow day-trader.
Among the charges included was the use of spoofing algorithms, in which first, just prior to the Flash Crash, he placed thousands of E-mini S&P 500 stock index futures contract orders.
[20] Sarao began his alleged market manipulation in 2009 with commercially available trading software whose code he modified "so he could rapidly place and cancel orders automatically.
"[20] Sarao is a 36-year-old small-time trader who worked from his parents’ modest semi-attached stucco house in Hounslow in suburban west London.
[3][6] For years, Sarao denounced high-frequency traders, some of them billion-dollar organisations, who mass manipulate the market by generating and retract numerous buy and sell orders every millisecond ("quote stuffing") — which he witnessed when placing trades at the Chicago Mercantile Exchange (CME).
"[36]: 2 At the time of the speech Haldane acknowledged that there were many theories about the cause of the Flash Crash but that academics, governments and financial experts remained "agog.