Business and Personal Finance Dictionary

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• SPOOFING
  
  Some market analysts maintain that the increased volatility in stock markets may be the result of spoofing, or phantom bids. Here's how spoofing works. Traders who own shares of a certain stock place an anonymous buy order for a large number of shares of the stock through an electronic communications network (ECN). Then they cancel, or withdraw, the order seconds later. As soon as the order is placed, however, the price jumps. Thats because investors following the market closely enter their own orders to buy what seems to be a hot stock and drive up the price. When the price rises, the spoofer sells shares at the higher price, and gets out of the market in that stock. Investors who bought what they thought was a hot stock may be left with a substantial loss if the price quickly drops back to its prespoof price.
  
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