New Flash Crash Research - Open Book Delays
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This first set of charts shows the relationship between quote message
traffic and delay in NYSE's OpenBook Ultra (their premium direct feed product)
on May 6, 2010. We count the number of new orders (message 'O') and cancel
orders (message 'C') for each 20ms period and plot this as a blue line, scaled
to messages/second. We also take an average of the difference between the
SourceTime and SendTime fields, and plot this as a red line scaled in
microseconds -- a value of 25,000 means the average delay was 25,000
microseconds or 25 milliseconds.
There appears to be a very strong correlation between message rate and delay.
We've added a line at 100,000 -- it seems whenever traffic exceeds that rate
(blue line goes over the horizontal red line), then the delay will increase.
Keep in mind this is an average delay over a 20ms period. We've seen many
spikes to 200ms. This is a direct exchange feed, not CQS. And this delay is
independent of the one we reported on between the NYSE and CQS. And finally, we
don't mean to single out the NYSE, we are confident these delays occured
everywhere, and given the data and time, we're sure we could find them.
It is interesting that the SEC used the same dataset for their flash crash
report, but didn't report about this relationship -- only stating that the
delay averaged 8ms. Averaged over what time period, or how it was even measured
isn't stated. Frankly, we are not sure how they could have computed the average
delay and missed the significance of it's direct relationship to message
traffic. One could say they weren't looking for it, only we'd point out the
pains they went to play down the role of quote-stuffing.
If we could find the relationship between the message rate and delay after only
a few hours of analysis, you can be absolutely sure that the top HFT firms
absolutely know about it. |
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