A flurry of stock market orders from an unidentified computer program accounted for 4% of U.S. quote traffic last week. Orders placed for roughly 500 stocks were quickly canceled without any trades being executed, CNBC noted.
Market-data tracking firm Nanex said the algorithm behind the trades was routed from the Nasdaq, placing numerous orders and then canceling them repeatedly. In doing so, it managed to use 10% of available trading bandwidth.
High-frequency traders might use such a program to hog bandwidth, slowing down the system for other traders for arbitrage purposes. That sort of trading and market interference has caught the attention of regulators. Last month, a U.S. Senate committee held discussions on how to prevent such incidents.
Some industry experts called for a tax on “order-stuffing,” the deliberate placement of fake bids and offers that then get canceled, in order to discourage the practice.