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6 Charged With 'Spoofing' by SEC

November 06, 2001|Bloomberg News

The SEC charged six people Monday with manipulating stock prices by entering false orders to trade stocks and then quickly canceling them, a practice known as "spoofing."

The use of "phantom quotes" typically occurs with thinly traded securities that have wide spreads between the buying and selling prices posted by Nasdaq dealers, the SEC said.

By making--and quickly withdrawing--phantom offers, traders hope to move prices and make more money on other trades.

Five of the six people agreed to pay a total of $43,861 to settle the civil-fraud charges, the SEC said. The sixth is contesting the charges.

"Were spoofing to become widespread, it could reduce liquidity for bona fide investors," said Thomas Newkirk, SEC associate enforcement director.

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