4 ms·

So essentially the exchanges offer multiple data feeds. These feeds are differentiated by a couple of points. 1) How much market data they give out. Typicall

So essentially the exchanges offer multiple data feeds. These feeds are differentiated by a couple of points. 1) How much market data they give out. Typically this is broken into 3 levels: - Level 1, Just the top of book quote, this is the best bid and offer and their corresponding number of shares at this price level. - Level 2 Depth of market at each price level, same as above but you can see all liquidity offered. - Level 3 same as Level 2 but you can see each individual order that contributes to each price level This differentiation is generally considered to be a good thing as most people including most hedge funds can get by with even Level 1 quotes. The other way they differentiate is the speed at which you get updates. Have a look here to see what just the Nasdaq offers. http://www.nasdaqtrader.com/Trader.aspx?id=FeedMIPS http://www.nasdaqtrader.com/Trader.aspx?id=FeedMIPS You can spend anywhere from $500/month to $75,000/month to receive market data from just the Nasdaq, one of 50 trading venues in the US. As you can imagine the difference is speed. The slower methods will use the text based FIX protocol and the fastest methods give you a feed and an FPGA to parse the feed with. It's this later feed that is getting the exchanges into trouble as these feeds notify the user of trades before the SIP can be updated which lets firms have a 300 millisecond second peek at the market before everyone else does. Couple these faster feeds with many dark pools not reporting trades in a timely manner and new order types that allow firms to sweep liquidity at one exchange only( ie not rout-able orders) and you get a situation where latency arb can thrive.

easytiger 11y ago
> As you can imagine the difference is speed. The slower methods will use the text based FIX protocol and the fastest methods give you a feed and an FPGA to parse the feed with. Err, No. You can parse FIX with an FPGA if you feel like it. It is up to you how you consume the data. The differential will be CoLocation vs dedicated line vs internet delivery on a base level and then differing subsets of feeds to varying liquidity pools. So really you are paying whomever owns the DC for the privilege of a seat in the same DC as the exchange and for the cross connect right into their cage.
- chollida1 11y ago
  >Err, No. You can parse FIX with an FPGA if you feel like it. That's true but no one said you couldn't. What I said was that FIX based feeds would be slower than binary ones. I stand behind this. I also said that some binary feeds come with an FPGA card for parsing them, you are of course free to use your own FPGA to parse a fix feed or binary feed, but the binary feed will be faster due to it being smaller. >The differential will be CoLocation vs dedicated line vs internet delivery on a base level and then differing subsets of feeds to varying liquidity pools. This is wrong, but its not your fault, its clear you aren't in the industry or really understand it at all and that's ok. Colocation is part of what you pay for, but the latency and bandwidth of the feed itself also is part of what you pay for. You'll also pay for the type of data you receive and the SLA contract that dictates how fast you'll receive your data at the 99.99% level. Feel free to mail me if you'd like to learn more!
kbenson 11y ago
> It's this later feed that is getting the exchanges into trouble as these feeds notify the user of trades before the SIP can be updated which lets firms have a 300-700 nano second peek at the market before everyone else does. From the article: Specifically, we found that stock quotes from the NYSE were delayed by more than 30 seconds to the public quotation feed (chart 1), relative to Open Book, which is NYSE's expensive direct feed product used mostly by High Frequency Traders (HFT). That indicates it was quite a bit more than 300-700 nano seconds at it's worst, by a few orders of magnitude. The chart showing the delay over time in their testing period shows a delay of 200ms routinely. That's way more than a few hundred nanoseconds.
- chollida1 11y ago
  Yes, but to be clear that was a very special situation that hadn't happened before or since. They were essentially fined for not having good developers. The NYSE has always had a reputation of being awfully inept from a technology standpoint, though they have made strides in the past few years. That particular time was made even worse by the direct feed holding up much better that their SIP feed, though the direct feed was also slower than normal. An accurate title might be NYSE fined for having a software bug that slowed down one feed occurred during the busiest time in the markets history.
  - kbenson 11y ago
    > Yes, but to be clear that was a very special situation that hadn't happened before or since. If by a special situation, you mean directly observable at multiple time periods. Here's what the article says: To satisfy a curiosity of whether the NYSE public quote delay was unique to May 6, 2010, we ran another quote-by-quote comparison of time-stamps from the public quote and Open Book for a 30 minute trading period in General Electric stock (GE) on July 21, 2010 (see chart 2). We chose this period because there was a noticeable lag in the public quote from the NYSE versus quotes from other exchanges, allowing us to rule out the consolidation process as a source of the delay. So they were able to find another time period exhibiting the same behavior as the flash crash at a later date, and it doesn't appear they had to look very hard (but there aren't a lot of details on that). Thirty seconds is a crazy amount of lag, but that was during the "special situation". That they look to have routinely had lag well into the hundreds of milliseconds is more troubling, because there's no longer a special situation to point towards as an excuse.
PhantomGremlin 11y ago
new order types that allow firms to sweep liquidity at one exchange only( ie not rout-able orders) You say that like it's a bad thing. My understanding is that an "intermarket sweep order"[1] (aka ISO) is essential to the proper functioning of the market. Otherwise, here's what used to happen all the time: - the "true" market for XYZ is $10.00 bid, $10.01 offer. (Let's ignore the mantra of relativity that "simultaneity does not exist"). - in this case lets assume NASDAQ prices currently reflect that "true" market, and prices disseminated by NYSE are stale. - a buy order arrives at NASDAQ, willing to buy at $10.01 - NYSE is supplying stale data, claims it has stock for sale at $10.00 - without ISO, NASDAQ can't allow the transaction to occur at $10.01, but is obligated to respect the stale data it is receiving from NYSE. NASDAQ must reject the order, or route it to NYSE. - SUCKERS! the NYSE quote was stale, but the order was not transacted on NASDAQ. And, there is no longer any stock for sale at $10.00 at NYSE, so it won't be filled there either! Here's an article that claims that ISOs are a form of protection against high frequency traders:[2] Brokers that don’t use ISOs in fast market conditions disadvantage their clients and subsidize the profits of HFTs That article was from 2012, but does illustrate the problem that ISOs were attempting to solve. It's not a panacea, because as the article points out, HFTs are also free to use ISOs for their own purposes. [1] https://en.wikipedia.org/wiki/Intermarket_sweep_order https://en.wikipedia.org/wiki/Intermarket_sweep_order [2] http://tabbforum.com/opinions/why-hfts-have-an-advantage-part-3-intermarket-sweep-orders http://tabbforum.com/opinions/why-hfts-have-an-advantage-par...
- chollida1 11y ago
  >> new order types that allow firms to sweep liquidity at one exchange only( ie not rout-able orders). > You say that like it's a bad thing. Umm I said no such thing. Please don't make thing up. The order types are useful to market makers and help prevent locked markets, which REG NMS prohibits. I use them every day and I"m not at an HFT firm.

easytiger 11y ago

> As you can imagine the difference is speed. The slower methods will use the text based FIX protocol and the fastest methods give you a feed and an FPGA to parse the feed with. Err, No. You can parse FIX with an FPGA if you feel like it. It is up to you how you consume the data. The differential will be CoLocation vs dedicated line vs internet delivery on a base level and then differing subsets of feeds to varying liquidity pools. So really you are paying whomever owns the DC for the privilege of a seat in the same DC as the exchange and for the cross connect right into their cage.

chollida1 11y ago
>Err, No. You can parse FIX with an FPGA if you feel like it. That's true but no one said you couldn't. What I said was that FIX based feeds would be slower than binary ones. I stand behind this. I also said that some binary feeds come with an FPGA card for parsing them, you are of course free to use your own FPGA to parse a fix feed or binary feed, but the binary feed will be faster due to it being smaller. >The differential will be CoLocation vs dedicated line vs internet delivery on a base level and then differing subsets of feeds to varying liquidity pools. This is wrong, but its not your fault, its clear you aren't in the industry or really understand it at all and that's ok. Colocation is part of what you pay for, but the latency and bandwidth of the feed itself also is part of what you pay for. You'll also pay for the type of data you receive and the SLA contract that dictates how fast you'll receive your data at the 99.99% level. Feel free to mail me if you'd like to learn more!

kbenson 11y ago

> It's this later feed that is getting the exchanges into trouble as these feeds notify the user of trades before the SIP can be updated which lets firms have a 300-700 nano second peek at the market before everyone else does. From the article: Specifically, we found that stock quotes from the NYSE were delayed by more than 30 seconds to the public quotation feed (chart 1), relative to Open Book, which is NYSE's expensive direct feed product used mostly by High Frequency Traders (HFT). That indicates it was quite a bit more than 300-700 nano seconds at it's worst, by a few orders of magnitude. The chart showing the delay over time in their testing period shows a delay of 200ms routinely. That's way more than a few hundred nanoseconds.

chollida1 11y ago
Yes, but to be clear that was a very special situation that hadn't happened before or since. They were essentially fined for not having good developers. The NYSE has always had a reputation of being awfully inept from a technology standpoint, though they have made strides in the past few years. That particular time was made even worse by the direct feed holding up much better that their SIP feed, though the direct feed was also slower than normal. An accurate title might be NYSE fined for having a software bug that slowed down one feed occurred during the busiest time in the markets history.
- kbenson 11y ago
  > Yes, but to be clear that was a very special situation that hadn't happened before or since. If by a special situation, you mean directly observable at multiple time periods. Here's what the article says: To satisfy a curiosity of whether the NYSE public quote delay was unique to May 6, 2010, we ran another quote-by-quote comparison of time-stamps from the public quote and Open Book for a 30 minute trading period in General Electric stock (GE) on July 21, 2010 (see chart 2). We chose this period because there was a noticeable lag in the public quote from the NYSE versus quotes from other exchanges, allowing us to rule out the consolidation process as a source of the delay. So they were able to find another time period exhibiting the same behavior as the flash crash at a later date, and it doesn't appear they had to look very hard (but there aren't a lot of details on that). Thirty seconds is a crazy amount of lag, but that was during the "special situation". That they look to have routinely had lag well into the hundreds of milliseconds is more troubling, because there's no longer a special situation to point towards as an excuse.

PhantomGremlin 11y ago

new order types that allow firms to sweep liquidity at one exchange only( ie not rout-able orders) You say that like it's a bad thing. My understanding is that an "intermarket sweep order"[1] (aka ISO) is essential to the proper functioning of the market. Otherwise, here's what used to happen all the time: - the "true" market for XYZ is $10.00 bid, $10.01 offer. (Let's ignore the mantra of relativity that "simultaneity does not exist"). - in this case lets assume NASDAQ prices currently reflect that "true" market, and prices disseminated by NYSE are stale. - a buy order arrives at NASDAQ, willing to buy at $10.01 - NYSE is supplying stale data, claims it has stock for sale at $10.00 - without ISO, NASDAQ can't allow the transaction to occur at $10.01, but is obligated to respect the stale data it is receiving from NYSE. NASDAQ must reject the order, or route it to NYSE. - SUCKERS! the NYSE quote was stale, but the order was not transacted on NASDAQ. And, there is no longer any stock for sale at $10.00 at NYSE, so it won't be filled there either! Here's an article that claims that ISOs are a form of protection against high frequency traders:[2] Brokers that don’t use ISOs in fast market conditions disadvantage their clients and subsidize the profits of HFTs That article was from 2012, but does illustrate the problem that ISOs were attempting to solve. It's not a panacea, because as the article points out, HFTs are also free to use ISOs for their own purposes. [1] https://en.wikipedia.org/wiki/Intermarket_sweep_order https://en.wikipedia.org/wiki/Intermarket_sweep_order [2] http://tabbforum.com/opinions/why-hfts-have-an-advantage-part-3-intermarket-sweep-orders http://tabbforum.com/opinions/why-hfts-have-an-advantage-par...

chollida1 11y ago
>> new order types that allow firms to sweep liquidity at one exchange only( ie not rout-able orders). > You say that like it's a bad thing. Umm I said no such thing. Please don't make thing up. The order types are useful to market makers and help prevent locked markets, which REG NMS prohibits. I use them every day and I"m not at an HFT firm.