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»Forums Index »General Discussion »Trading Tips, Tricks and Ideas »Crossed Quotes
Author Topic: Crossed Quotes (3 messages, Page 1 of 1)

stargrazer
-DTN Evangelist-
Posts: 242
Joined: Jun 13, 2005

Right Here & Now


Posted: Jan 26, 2007 10:12 PM          Msg. 1 of 3
This is continuation of http://forums.dtnma.com/index.cfm?page=topic&topicID=1394

I realize crossed quotes are supposedly 'illiegal'. But I seem to recall this has been relaxed (once I find it, I'll post it, if I find it). However, certain feeds happen to contain quite a number of these instances. For instance, GOOG is a highly traded, highly volatile instrument. It has these crossed quotes very frequently on a daily basis. Even IQFeed's Level II data has these crossed quotes.

So... one would be led to believe that, as you say, exchanges are having problems at these times. But they happen to frequently to think this is the issue. Perhaps the quote stream is incomplete. But as mentioned, the simulation results were inconclusive and did not stand up to continued use. If simulated over a longer period of time and then run on live data, I can't fortell what the result would be. At some future time I may be able to say, that is, if the simulator comes up with this particular signal again.

nsolot
-DTN Guru-
Posts: 273
Joined: Sep 4, 2004


Posted: Jan 27, 2007 08:37 AM          Msg. 2 of 3
Here are some older threads

http://forums.dtnma.com/index.cfm?page=topic&topicID=1264

and a much older one

http://forums.dtnma.com/index.cfm?page=topic&topicID=229&start=1

Since then QQQ changed to QQQQ and the primary market moved from Amex to Nasdaq. Running the same test for data from Jan 25, 2007, I show approx 0.5% of the time QQQQ and SPY are in a crossed state. My ATS focuses on these since the markets are highly liquid and with futures and options, arbs should clear any slight market inefficiencies very quickly.

Since I'm not using IQ's Level 2, I'm not sure if they provide a time stamp. Perhaps you might want to add your own, and then you can tell if the quote is "stale", or if it popped up recently outside the other BBOs. If the former, my hunch is that you couldn't get an execution at that price. If the latter, perhaps there is a trading opportunity. My guess is that if you're watching an active issue, and the quote is more than a few seconds old, you can't get executed at that price.

The next thing I would be looking at is whether the condition persists for more than a fraction of a second. Let's say you detect a crossed state, but it clears in less than 100ms. In that case, my hunch is that the quote you are seeing has already been updated, but that it takes time for a new quote to go from market center to IQ servers, and then out to you.

Another item which I find useful & enlightening is to analyze which are most active markets for the ticker you watch using the market center codes. Usually there are a few very active ones, and others which have very little volume. Using the regional quotes for the active market centers, I feel I can get a better picture of the "true" state of the market, while ignoring quotes from those markets where executions may be suspect.

stargrazer
-DTN Evangelist-
Posts: 242
Joined: Jun 13, 2005

Right Here & Now


Posted: Jan 27, 2007 11:01 AM          Msg. 3 of 3
From the two links you posted, it would seem that crossed quotes is something inherent in a multi-location trading society, and like all the other 'noise'/'randomness' in market feeds, can be used or ignored as appropriate.
 

 

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