Automatic Order Execution and Latency in the Dissemination of U.S. Equity Data

39 Pages Posted: 28 Jan 2021 Last revised: 5 Apr 2021

See all articles by Sander Schwenk-Nebbe

Sander Schwenk-Nebbe

Aarhus University - Department of Economics and Business Economics

Date Written: December 7, 2020

Abstract

This study reveals that public U.S. market data at present yields incorrect prevailing quoted prices for 29% of trades from the NYSE and 33% of trades from Nasdaq. Quote updates that accurately occur after trades at an exchange are often disseminated before the trades on the consolidated data feeds and are thus recorded in TAQ data in incorrect order. This generates substantial errors in trading cost and price impact measures. I identify the culprit behind the errors, recommend a simple approach that yields correct prevailing prices, and discuss changes to market design that would prevent the issue.

Keywords: Market microstructure, NYSE TAQ data, U.S. equity data dissemination, dissemination latency, automatic order matching and execution, trade and quote sequence errors

JEL Classification: G10, G18, K22

Suggested Citation

Schwenk-Nebbe, Sander, Automatic Order Execution and Latency in the Dissemination of U.S. Equity Data (December 7, 2020). Available at SSRN: https://ssrn.com/abstract=3744743 or http://dx.doi.org/10.2139/ssrn.3744743

Sander Schwenk-Nebbe (Contact Author)

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V, 8210
Denmark

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