I need someone to set me straight on this!

As I understand Level2 messages reviles the order book for a stock.

Now this is the way I collect them now:
Each ReceiveQuote event I get’ us loaded into an array where there is an entry for each market Maker (MM) and in order to see the book I run a sort on each side so the Bid side will be sorted Highest on top and the Ask side lowest on top.
Essentially I get the table below which is the true table of “KLAC” taken on Jan 16 2007 at 13:13.

The one thing that appears immediately is the fact that the best Bid is much Higher that the Best Ask and this is due to the fact that I do not know when to consider an entry obsolete.
Therefore I get the entry fron MSCO put in at 9:36 am still in the table confusing thing up.
My first question is: how do I know when to consider an entry obsolete?
My second question is what are the fields: reason’ condition_code and source_ID in the ReceiveQuote event.
Thanks in advance
Shimon


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Time: [13:13:13]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
______________________________________________
| Bid || Ask |
______________________________________________
|MSCO |051.830|000001||CINN |050.510|000001|
|ETRD |051.590|000005||EDGX |050.510|000001|
|CDRG |051.510|000005||NSDQ |050.510|000004|
|BARD |051.340|000001||ARCX |050.510|000011|
|COWN |051.310|000001||AMEX |050.530|000010|
|DBAB |051.050|000001||BTRD |050.540|000003|
|GROW |051.000|000001||LEHM |050.540|000002|
|MOKE |051.000|000001||FBCO |050.560|000001|
|WBLR |050.790|000001||BOFA |050.770|000001|
|NITE |050.750|000001||FBRC |050.780|000001|
|RBCM |050.720|000001||SBSH |050.940|000001|
|SBSH |050.620|000001||AGED |051.110|000001|
|BOFA |050.590|000001||UBSS |051.110|000010|
|ARCX |050.500|000011||WBLR |051.570|000001|
|NSDQ |050.500|000002||DBAB |051.660|000001|
|CINN |050.500|000003||NFSC |051.700|000030|
|BTRD |050.500|000004||MADF |051.760|000001|
|AGED |050.500|000001||COWN |051.810|000001|
|AMEX |050.480|000010||CDRG |052.000|000001|
|LEHM |050.460|000002||MSCO |052.290|000001|
|TMBR |050.430|000001||GSCO |052.340|000001|
|GSCO |050.420|000001||WCHV |052.420|000001|
|FBCO |050.410|000001||OPCO |052.810|000001|
|EDGX |050.410|000020||ADAM |052.890|000001|
|UBSS |050.380|000010||RBCM |052.920|000001|
|OPCO |050.350|000001||CANT |052.930|000001|
|MADF |050.250|000005||PIPR |052.960|000001|
|WCHV |050.220|000001||JEFF |053.000|000001|
|SUSQ |050.000|000001||GROW |053.000|000001|
|PERT |049.900|000001||SUSQ |053.000|000001|
|FBRC |049.780|000001||MOKE |053.000|000001|
|STFL |049.600|000001||MLCO |053.000|000003|
|NFSC |049.400|000010||BARD |053.050|000001|
|CANT |049.200|000001||NITE |053.080|000001|
|ADAM |048.500|000001||PRUS |053.150|000001|
|MERI |048.500|000001||BMOC |053.190|000001|
|PIPR |048.450|000001||TMBR |053.580|000001|
|PRUS |048.400|000001||STFL |053.750|000001|
|JEFF |048.200|000001||PERT |053.800|000001|
|MLCO |048.080|000001||BERN |054.170|000001|
|BMOC |047.860|000001||MAXM |055.000|000001|
|BERN |047.400|000001||MERI |055.000|000001|
|MAXM |043.000|000001||THNK |075.000|000001|
|THNK |025.000|000001||STCS |100.000|000001|
|STCS |020.000|000001||AUTO |1000.000|000001|
|VNDM |000.010|000001||CRTC |2000.000|000001|
|NACI |000.010|000001||VNDM |199999.980|000001|
|AUTO |000.010|000002||ETRD |199999.980|000001|
|CRTC |000.010|000001||NACI |199999.980|000001|
______________________________________________

---

Shimon Dekel

Some further info is available at this post:
http://forums.dtnma.com/index.cfm?page=topic&topicID=1192.

In addition, I've posted some code that may help to code for the price book and order book:
http://www.oneunified.net/blog/Trading/SmartQuant/IQFeedOrderBook.article

As a direct answer to your question, remove entries when you see a zero quantity. Bid and ask sides need to be handled independently.

Thanks stargrazer, This makes sense to me, I will give it a test.

---

Shimon Dekel

After some additional testing I am yet to get this right.
I have included two additional samples (out of many) that shows an unbalanced table

(Both samples are from January 25th 2007.)

Sample 1:
Stock: ADSK

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Time: [15:36:10]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
______________________________________________
| Bid || Ask |
______________________________________________
|NSDQ |042.200|000004||EDGA |042.180|000001|
|CINN |042.200|000005||NSDQ |042.210|000001|
|ARCX |042.190|000003||ARCX |042.210|000007|
|AMEX |042.180|000010||CINN |042.220|000001|
|BTRD |042.180|000001||BTRD |042.220|000001|
|AUTO |042.150|000012||AMEX |042.230|000010|
|GSCO |042.140|000001||COWN |042.250|000001|
|EDGX |041.880|000005||GSCO |042.260|000001|
|COWN |041.850|000001||EDGX |043.150|000010|
|EDGA |000.000|000000||AUTO |044.000|000003|

“EDGA” on the ask side is lower that NSDQ on the bid side.
This is an unbalance table and an impossible situation.
Clearly EDGA on the Ask side is at fault and I went back to see its last entry and here it is:

L2-->MarketMakerID[EDGA ] Ask[042.180]/Bid[000.000] AskSize[000001]/BidSize[000000] Time[03:19:38] Reason[ :NDR] ConditionCode[R:REG OPEN ] SourceID[015]

It shows an ask side with a price of 42.18 and quantity of 1 (100)
This entry is apparently obsolete as the market has change and this is no longer the offer, but I had no way of telling this from the Level 2 feed.


Here is another sample:


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Time: [15:51:45]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
______________________________________________
| Bid || Ask |
______________________________________________
|ARCX |048.890|000005||BTRD |048.860|000001|
|NSDQ |048.890|000003||EDGX |048.890|000001|
|CINN |048.890|000001||CINN |048.900|000001|
|AMEX |048.860|000010||NSDQ |048.900|000004|
|ETRD |048.860|000008||ARCX |048.900|000011|
|UBSS |048.830|000004||AMEX |048.910|000010|
|LEHM |048.780|000001||LEHM |048.940|000001|
|JPMS |048.750|000001||TMBR |048.960|000011|
|FBCO |048.600|000001||WEDB |049.020|000001|
|TMBR |048.600|000012||COWN |049.050|000001|
|SALI |048.600|000001||JPMS |049.050|000001|
|KBRO |048.600|000001||WBLR |049.170|000001|
|RBCM |048.590|000001||ETRD |049.230|000010|
|OPCO |048.590|000001||BOFA |049.250|000001|
|SBSH |048.590|000001||BARD |049.280|000001|
|GSCO |048.580|000001||UBSS |049.330|000002|
|WCHV |048.580|000001||BEST |049.330|000001|
|BARD |048.580|000001||FBRC |049.490|000001|
|PRUS |048.550|000001||JEFF |049.680|000001|
|LAZA |048.550|000001||MADF |049.940|000001|
|COWN |048.550|000001||GSCO |050.000|000001|
|BEST |048.550|000001||WCHV |050.130|000001|
|DBAB |048.550|000001||CIBC |050.140|000001|
|THNK |048.510|000001||GROW |050.200|000001|
|MLCO |048.510|000001||SBSH |050.210|000001|
|WEDB |048.510|000001||PIPR |050.320|000001|
|CHLM |048.500|000001||MSCO |050.520|000001|
|PERT |048.500|000004||THNK |050.520|000001|
|NEED |048.500|000001||PACS |050.750|000001|
|HSBC |048.500|000001||OPCO |050.800|000001|
|EDGX |048.500|000002||PERT |050.860|000001|
|STFL |048.500|000001||CDRG |051.000|000005|
|BOFA |048.500|000001||STFL |051.000|000001|
|FBRC |048.490|000001||NEED |051.010|000001|
|PIPR |048.440|000001||NITE |051.240|000001|
|WBLR |048.400|000001||RHCO |051.250|000001|
|ADAM |048.400|000001||FBCO |051.490|000001|
|MSCO |048.380|000001||BMOC |051.540|000001|
|NITE |048.370|000001||HDLY |051.590|000001|
|PACS |048.250|000001||SALI |052.000|000001|
|CIBC |048.230|000001||MWRE |053.300|000001|
|HILL |048.200|000001||RBCM |053.730|000001|
|GROW |048.200|000001||KBRO |054.150|000001|
|JEFF |048.180|000001||ADAM |054.500|000001|
|BMOC |048.010|000001||PRUS |054.510|000001|
|HDSN |048.000|000001||TWPT |054.550|000001|
|TWPT |048.000|000001||MLCO |054.550|000001|
|CANT |048.000|000001||DBAB |054.600|000001|
|CDRG |048.000|000002||AUTO |054.800|000003|
|MAXM |048.000|000001||KING |054.970|000001|
|MADF |048.000|000003||HILL |055.450|000001|
|KING |047.990|000001||HSBC |056.000|000001|
|HDLY |047.890|000001||CHLM |056.000|000001|
|BERN |047.860|000001||NFSC |056.000|000002|
|BTRD |047.500|000042||CANT |056.000|000001|
|MWRE |047.000|000001||MAXM |057.000|000001|
|ALLN |046.000|000001||HDSN |057.000|000001|
|EFGI |045.000|000001||BERN |057.050|000001|
|FACT |045.000|000001||LAZA |059.810|000001|
|VNDM |045.000|000001||VNDM |060.000|000001|
|NFSC |040.460|000001||ALLN |060.000|000001|
|SUSQ |034.750|000001||FACT |060.000|000001|
|WEED |030.500|000001||EFGI |060.000|000001|
|STCS |020.000|000001||SUSQ |070.250|000001|
|CHDN |000.010|000001||WEED |075.520|000001|
|DOTC |000.010|000001||FRAN |099.990|000001|
|RHCO |000.010|000001||STCS |120.000|000001|
|BNCH |000.010|000001||CRTC |2000.000|000001|
|SEAB |000.010|000001||CHDN |2000.010|000001|
|CRTC |000.010|000001||SEAB |2000.200|000001|
|FSWC |000.010|000001||GARC |199999.980|000001|
|AUTO |000.010|000002||DOTC |199999.980|000001|
|FRAN |000.010|000001||FSWC |199999.980|000001|
|GARC |000.010|000001||BNCH |199999.980|000001|
|FAGI |000.010|000001||FAGI |199999.980|000001|
|ISSE |000.000|000000||EDGA |000.000|000000|


“BTRD” on the ask side is at fault and the last entry from “BTRC” is here:

L2-->MarketMakerID[BTRD ] Ask[048.860]/Bid[047.500] AskSize[000001]/BidSize[000042] Time[03:47:46] Reason[ :NDR] ConditionCode[R:REG OPEN ] SourceID[005]

Again a situation that the offer is obsolete but I had no way of telling that from the feed.

I need to resolve this so I can continue with my development.
Anyone?

---

Shimon Dekel

Those crossings appear to happen in fast moving markets. I see it happen in a number of symbols. I'd just take them with a grain of salt as they will quickly unravel themselves. I've even used them as 'decision' points for determining whether to get into or out of a trade.

I prefer using regional quotes to get a better sense of current market bid and ask. Quite frequently Level 1 & 2 shows obselete bid or ask. I've coded my model to watch the most active regional markets and if 2 of them agree on bid & ask, that's what I assume to be current & correct.

It may be worth upgrading to a DTN.IQ subscription if you don't have one already. This will allow you to use our DTN.IQ client software as well as 3rd party (your own) software. Within the DTN.IQ client software is a very nice Level II display that sorts and color codes the tiers at various prices. You can highlight a MMID to follow them. It also greys out any MMID that isn't in the market (Condition code L or zero price/volume). It may be a good sanity check as you develop your app. If you currently have the basic IQFeed, upgrading to DTN.IQ would only be $9 per month more if you pay annually (you already pay the API fee annually). You will then be able to use the GUI (nice for news, Level II or simple watch lists) and it increases the symbol limit to 1300.

---

Jay Froscheiser
DTN - Trading Markets

Thanks guys, I understand that life is not always an exact science and I will have to apply an intelligent filter to get read of some inaccuracies.
Something you said Stargrazer sparked my interest!
How would you use those inaccuracies to determine whether to get into or out of a trade?

As for what you said Jay, thanks, I am looking at upgrading anyway but never the less the Idea is that my software will do this all by itself automatically and will not depend on me to read this for it.
I need is assistance in interpreting your data and I am having problems doing this now.
Thanks
Shimon Dekel

---

Shimon Dekel

I had developed a Genetic Programming module and fed it quotes, trades and some indicators. It optimized to the point where one of the trade enter/exit conditions keyed on bid > ask. I ran the optimizer over two days. Out of sample testing didn't result in a ongoing success. I'm developing some different indicators and am planning to rerun at a later date. Next week I'll start writing about my trials and tribulations of brute forcing an automated trading strategy at http://www.oneunified.net/blog/Trading/index.blog

Personally, I'd be very hesitant to use crossed bid/ask for any purpose other than to be suspect of the current market conditions. I've studied this carefully and found it is typical of 1) fast market conditions (slow quotes coming from a source), or 2) technical problems at an exchange or ECN. I suspect (but could very well be wrong) that trades will not get filled on the erroneous side.

Technical problems still seem to plauge various exchanges on a regular basis. If by chance you use Interactive Brokers, they pop up messages advising of such. The problem is that when coding an ATS, the notification happens minutes after the problem occurs. I'd be very concerned about an ATS placing an order into a market where the quotes are suspect to begin with.

I'd be happy to continue on this topic, but we should move it to another section of the forum, as it's strayed from "developer support".

Continued at http://forums.dtnma.com/index.cfm?page=topic&topicID=1402.