Nanex Research

Nanex ~ 07-Jun-2013 ~ 1.1 Billion SPY Option Quotes

On June 5, 2013, the stock symbol SPY had 1.1 Billion option quotes, and 99 thousand trades. This is 10 times the number of quotes for SPY options on the day of the flash crash. In order to understand how absurd these numbers are, let's make a few comparisons with a well known active day: the day of the flash crash, May 6, 2010. For a look at quote, trade and symbol counts in the option markets, see this page.

SPY Options:

Counter May 6, 2010 June 5, 2013 Comment
Quotes 73,000,000 1,100,000,000 15 times the quotes on flash crash day
Trades 82,000 99,000 but only 1.2 times trades
Contracts 2,300,000 2,600,000 and just 1.1 times contracts
Quote/Trade 890 11,254 quote/trade ratio explodes

NMS Stocks:

Counter May 6, 2010 June 5, 2013 Comment
Quotes 1,112,000,000 722,000,000 64% of the quotes on flash crash day
Trades 65,000,000 27,000,000 41% of the trades
Shares 18,500,000,000 6,650,000,000 36% of the shares
Quote/Trade 17 27 yet quote/trade ratio 58% higher
#Stocks 7,868 7,774  94 fewer stocks than flash crash day

Fun facts: if you printed out SPY option quotes for June 5, 2013, using one line per quote, you'd need about 33,333 reams of paper: a stack over 1 mile high. If you spent just 1 second looking at each quote, for 8 hours a day, it would take 104 years.

Even more alarming, the number of option quotes in SPY has suddenly exploded - which you can see in the charts below. Obviously, no one at the SEC is paying attention. There should be an immediate review of recently proposed or added (10 share contracts, additional leaps, etc.) option contract types. In addition, a moratorium on new option's exchanges until this alarming explosion of unwanted quote spam is addressed. 

1. SPY Options Quotes - Daily Counts.  Note, the scale is in millions.
Over 1.1 billion option quotes in a day for just one equity symbol. There were 73 million SPY Option Quotes on May 6, 2010 - the day of the flash crash.

2. SPY Options Trades - Daily Counts. Note the scale in the chart above (quotes) is in Millions.
Where are the trades? Maybe it's harder to execute trades in a sea of quotes.

3. SPY Options Quote/Trade Ratio.
The number of quotes for every trade is accelerating at an alarming rate.

Nanex Research