>3) The huge order to buy makes other buyers think the price is about to increase significantly, so they immediately buy at the Spoofer's higher price even though they would otherwise prefer to wait for a lower one.
Wait a minute, how did we go from "facilitating the efficient exchange of assets" to "making it easier for speculator to gamble based on what other speculators are doing"?
edit: If anything, spoofing should be allowed to make the price discovery more efficient. For traders wouldn't trade as much based on what other traders are doing hoping to squeeze a short profit. Rather, if they really want in, they will get in with a market or fill-or-kill order at their desired price, period. And it will instantaneously snatch the lowest ask and go deeper into the order book if they want to allow slippage and get a bigger size as well. This would restrain all kinds of quick buck momentum trading and whatnot which only serve to increase the noise around the price and are purely speculative in nature.
Wait a minute, how did we go from "facilitating the efficient exchange of assets" to "making it easier for speculator to gamble based on what other speculators are doing"?
edit: If anything, spoofing should be allowed to make the price discovery more efficient. For traders wouldn't trade as much based on what other traders are doing hoping to squeeze a short profit. Rather, if they really want in, they will get in with a market or fill-or-kill order at their desired price, period. And it will instantaneously snatch the lowest ask and go deeper into the order book if they want to allow slippage and get a bigger size as well. This would restrain all kinds of quick buck momentum trading and whatnot which only serve to increase the noise around the price and are purely speculative in nature.