Layering

Layering is a sophisticated form of market manipulation that involves placing multiple orders at different price levels to create the illusion of significant support or resistance. Similar to spoofing, these orders are intended to be canceled before execution.

By creating a "layer" of orders, the manipulator tries to nudge the market price toward a target level. This technique is often used to facilitate the execution of a larger position at a more favorable price.

Layering is particularly effective in markets with low liquidity where a few large orders can significantly shift the price. It exploits the tendency of algorithms to follow price trends and order book signals.

Regulators categorize layering as a form of market abuse that impairs the fair functioning of the market. Surveillance systems monitor order modifications and cancellations to detect these patterns.

It is a deceptive practice that distorts the true supply and demand of an asset. Maintaining a fair market requires identifying and penalizing such behavior.