Layering is prohibited market manipulation under securities and futures law, and firms and individuals are regularly fined, barred and in some cases criminally prosecuted for it. It is a close relative of spoofing: spoofing usually means one large deceptive order, layering means a ladder of them.
The tell is intent, and regulators infer it from data: orders that are systematically cancelled before execution while the opposite-side order trades, repeated across days.
Example: a trader stacks 5,000 shares across 19.95, 19.94 and 19.93 with no intention of buying, waits for others to bid up, sells 2,000 real shares at 20.02, then cancels all the bids. Repeated 400 times a $0.02 edge is $16,000 — and it is a fraud, not a strategy.
Related: spoofing, momentum-ignition, phantom-liquidity, market-manipulation