Nanex 15-Apr-2014 ~ Banned Quotes in Face Book
Plotting the widest and tightest NBBO quote spreads for each one-second interval in
Face Book reveals that things aren't as steady as
High Frequency Traders would have
you believe. We also see just how often violations of the Reg NMS ban on locked (Bid
Price equals Ask Price) and crossed (Bid Price exceeds Ask Price) markets occur:
the chart below, there should ideally be no data points below the lowest permissible
spread of 1 cent (shown by the arrow labeled A).
1. Face Book NBBO Quote Spreads (Best Ask Price - Best Bid Price)
Blue is widest spread and red is lowest for each 1 second period between 9:00 and 10:30.
Regular market hours begin at 9:30. The spike at 9:55 is from the Michigan Consumer
Sentiment news release: note how the minimum NBBO spread balloons to 6 cents. All data points below 1 cent (see arrow labeled A)
are banned by Reg NMS.