Spoofing and pinging in foreign exchange markets

•Over 2.3 million limit orders with a total value of more than $3 trillion are studied.•The EUR/USD and USD/JPY markets are extremely sensitive to information-rich orders.•Pinging appears to be widespread in the EUR/SEK and USD/RUB markets. This paper investigates the susceptibility of foreign exchange (FX) spot markets to limit order submission strategies that are either intended to create a false impression of the state of the market (‘spoof orders’) or to extract hidden information from the market (‘ping orders’). Using a complete limit order book dataset from Electronic Broking Services (EBS), our findings suggest that spoofing is more likely to succeed in liquid markets, or on primary electronic trading platforms. Pinging, by contrast, might be more prevalent in illiquid markets, or on secondary electronic trading platforms.