Towards a model of the U.S. stock market: How important is the securities information processor?

Tivnan, Brian F.; Koehler, Matthew T. K.; Slater, David; Veneman, Jason G.; Tivnan, Brendan F.

doi:10.1109/wsc.2017.8247865

Cited by 4 publications

(2 citation statements)

References 26 publications

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“…To exploit this potential arbitrage opportunity, Trader C must anticipate the crossed market and exploit a latency advantage via a direct-feed connection to the market. While market participants may have the ability to act on these arbitrage opportunities, they may exist for only a very small window of time (e.g., 500 microseconds or less) [2]. These fleeting opportunities for latency arbitrage clearly indicate the ramifications of the tight interdependence between financial markets and the communication networks which connect them.…”

Section: Crossings Between Order Books Present Arbitrage Opportunitiesmentioning

confidence: 99%

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Price Discovery and the Accuracy of Consolidated Data Feeds in the U.S. Equity Markets

Tivnan

Slater

Thompson

et al. 2018

JRFM

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Both the scientific community and the popular press have paid much attention to the speed of the Securities Information Processor -the data feed consolidating all trades and quotes across the US stock market. Rather than the speed of the Securities Information Processor, or SIP, we focus here on its accuracy. Relying on Trade and Quote data, we provide various measures of SIP latency relative to high-speed data feeds between exchanges, known as direct feeds. We use first differences to highlight not only the divergence between the direct feeds and the SIP, but also the fundamental inaccuracy of the SIP. We find that as many as 60% or more of trades are reported out of sequence for stocks with high trade volume, therefore skewing simple measures such as returns. While not yet definitive, this analysis supports our preliminary conclusion that the underlying infrastructure of the SIP is currently unable to keep pace with the trading activity in today's stock market.

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Section: Crossings Between Order Books Present Arbitrage Opportunitiesmentioning

confidence: 99%

“…Elsewhere, we have focused on the importance of the SIP to a key measure of market qualityefficient, price discovery [2]. Here, we focus on extending that analysis to assess the accuracy of the SIP.…”

Section: Introductionmentioning

confidence: 99%