Nanex Research

Nanex ~ 10-Sep-2013 ~ Option Quoting Algo

There's an algo that submits quotes at the same millisecond of each second in the options market. Here's how to see when it fires: Sum the number of quotes for all option contracts by exchange that occur at each millisecond of a second over 1 minute of time. That is:

sum the number of option quotes from all contracts that were timestamped:

9:33:00.123 +
9:33:01.123 +
9:33:02.123 +
9:33:58.123 +

into one "bin". Do this for all 1000 bins.

The results of one minutes worth from two exchanges will look like the image below. If we create several images (one for each minute) and then compare those images, something unexpected appears: sharp, defined peaks show up at the same millisecond of time. As if an algo is firing off a quote at the exact same 1/1000th of a second every second. Take a look at the set of images below, captured in the first 30 minutes of August 20, 2013 (similar patterns show up on other days and times). We found this while investigating Goldman's rogue option algo. This phenomenon did not show up from other exchanges.

One minute, per millisecond option quote message rates for ISE and MIAX Options exchanges on August 20, 2013


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