Nanex Logo
Equity Quote Saturation

Back to Table Of Contents

CQS transmits on 12 multicast lines in order to distribute the processing load. The capacity guidelines, expressed in quotes per second, are as follows:

Capacity (Quotes per Second) per multicast line all 12 multicast lines
Before July 5, 2011 75,000 750,000
Starting July 5, 2011 100,000 1,000,000

The following charts plot each of the 12 individual CQS multicast lines and the total (which is divided by 10 to fit into the same scale) on a 1 millisecond basis.

The first chart shows one micro-burst of activity as it occurred on July 5th, 2011, which is the first day after CQS capacity was increased by 33% to 1 million quotes/second. The second chart shows how this same data might look if we imposed the capacity limits that were in effect prior to this trading day.

As you can see, the delay is significant. If this activity level occurred using the limits that existed on July 1st, the delay would have lasted approximately 200ms. We came up with three possible explanations:

1. July 5th just happened to be 33% more active than any trading day in history.
2. The capacity limits from before July 5th were at least 33% too low.
3. An algo is testing how much more quote noise it needs to generate to cause the same effect as before.

So where does it end? CQS is already planning to increase capacity an additional 25% in October 2011. How long before that limit is hit ? We think it will be hit the very next trading day. If 3 years ago someone told us that equity quote traffic rates for NYSE, AMEX and ARCA issues would exceed 1 Million/second (not even counting Nasdaq stocks), we would have thought the market would have entered the greatest bull or bear market ever known. Instead, you can't even recognize from a 1 minute chart where these bursts of out-of-control quote traffic rates occur. And when they do occur, a significant percentage of those quotes will have already expired before they even leave the exchange network.

At these rates of growth, we will no longer have a diversity of trading participants with accurate market data, and regulators will have no hope of ever piecing together what happened after the next disaster. It took the SEC five months just to assemble equity data to analyse the flash crash. When the next disaster strikes, they will have to contend with 5 to 10 times more data.



Publication Date: 07/07/2011

This report and all material shown on this website is published by Nanex, LLC and may not be reproduced, disseminated, or distributed, in part or in whole, by any means, outside of the recipient's organization without express written authorization from Nanex. It is a violation of federal copyright law to reproduce all or part of this publication or its contents by any means. This material does not constitute a solicitation for the purchase or sale of any securities or investments. The opinions expressed herein are based on publicly available information and are considered reliable. However, Nanex makes NO WARRANTIES OR REPRESENTATIONS OF ANY SORT with respect to this report. Any person using this material does so solely at their own risk and Nanex and/or its employees shall be under no liability whatsoever in any respect thereof.