Nanex Research

Nanex ~ 15-Apr-2014 ~ CBOE Option Quotes Overload

System Overload Warning

On April 15, 2014, the number of option quotes exploded, threatening to set an all time record (last set in August 2011). Digging through the more than 10 billion messages, we discovered that at least one exchange, the CBOE, appears overwhelmed during the many quote surge events.

1. Option quotes messages by reporting options exchange for each millisecond for about 1 second of time on April 15, 2014. Data is from OPRA.
The chart below captures a sudden increase in option quotes over a second of time. These events involved hundreds of thousands of individual option contracts and happen frequently (every minute or two). To remove some of the clutter, we'll zoom in on CBOE and 2 other exchanges below.

2. Same chart as above, but showing just 3 of the 12 exchanges (note, the color coding doesn't match - deal with it).

The red line shows the total number of options quotes coming from the CBOE for any option contract during each millisecond (ms) of time. The gap indicates there were no quote updates from the CBOE for any option for approximately 50ms (gaps of even a few milliseconds are rare).  Note how activity quickly drops from the other two exchanges (purple and green lines fall right after spiking), but continues, and fluctuates wildly from the CBOE for several hundred milliseconds:
This is a pattern indicative of system overload - an alarming development.
Because quotes from one or more of the other exchanges don't have this pattern, we can rule out a problem with the Options SIP (OPRA) - the likely culprit is somewhere between the CBOE and the input into the SIP.

3. Step through an additional 54 examples and note similarities with the chart above.


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