Spoof, Bluff, Go For It: A Defence of Spoofing

Khorasanee, Kasim

Abstract

Spoofing—placing orders on financial exchanges intending to withdraw them prior to execution—is widely legally prohibited. I argue instead on two main grounds that spoofing should be permitted and legalised. The first is that spoofing as a form of bluffing remains within the market practice of making legally binding offers—as opposed to lying or betraying trust—and primarily concerns the spoofer’s personal information. As a form of bluffing spoofing helps prevent financial speculators, in particular high-frequency algorithmic traders, from easily profiting by other market actors reliably revealing their underlying preferences through their market activity. The second is that at the systemic level permitting spoofing would benefit non-speculative actors who place orders to hedge economic risk and whose activities provide the raison d’être for financial exchanges, differentiating them from simple forums for gambling. I also address potential concerns that legalised spoofing would drive speculators out of financial markets entirely and, therefore, undermine market liquidity. This work contributes to the wider debate in business ethics regarding bluffing by illustrating the acceptability of bluffs which do not betray counterparty trust or reliance on testimony by remaining within the framework of market practices.

Citation

Khorasanee, K. (2024). Spoof, Bluff, Go For It: A Defence of Spoofing. Journal of Business Ethics, 189(1), 201-215. https://doi.org/10.1007/s10551-022-05296-7

• Journal Article Type: Article
• Acceptance Date: Nov 11, 2022
• Online Publication Date: Nov 30, 2022
• Publication Date: Jan 1, 2024
• Deposit Date: Dec 2, 2022
• Journal: Journal of Business Ethics
• Print ISSN: 0167-4544
• Electronic ISSN: 1573-0697
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 189
• Issue: 1
• Pages: 201-215
• DOI: https://doi.org/10.1007/s10551-022-05296-7
• Keywords: High-frequency trading, Financial markets, Spoofing
• Public URL: https://nottingham-repository.worktribe.com/output/14320603
• Publisher URL: https://link.springer.com/article/10.1007/s10551-022-05296-7
• Additional Information: Nottingham Centre for Normative Political Theory