August 29, 2013

NASDAQ SIP Feed Latency: HFT vs Retail Traders

NASDAQ SIP feed latency: HFT vs retail traders.
 
NASDAQ CEO Robert Greifeld via CNBC

GREIFELD: SURE. WHAT HAPPENS IS THAT WE HAVE A DATA FEED WHICH CONSOLIDATES THE TRADING FOR 13 EXCHANGES. WE DO THAT FOR THE INDUSTRY. THAT HAD A PROBLEM. AS SOON AS WE SAW THAT IT HAD A PROBLEM, WE HAD A FUNDAMENTAL CONCERN. WE KNEW PROFESSIONAL TRADERS HAD ACCESS TO INDIVIDUAL DATA FEEDS, BUT THE TRADITIONAL LONG INVESTOR, RETAIL INVESTOR NOW, DIDN'T HAVE THE SAME INFORMATION. BECAUSE OF THAT, WE HALTED THE MARKET.

GREIFELD: THE HIGH FREQUENCY FIRMS WOULD HAVE ACCESS TO PROPRIETARY FEEDS INDIVIDUAL EXCHANGES, THE CONSOLIDATED FEED WHICH WE OPERATE HAD A PROBLEM, WASN'T GIVING QUOTES OUT, WE HAD TO HALT THE MARKET BECAUSE OF THAT. WE DIDN'T WANT TO HAVE A SITUATION WHERE INFORMATION IS ASYMMETRY AS YOU SAY.

As ThemisTrading points out, this was not an abnormal situation but the normal working of the quote feeds (and perhaps the markets should always be halted for this reason).

The feed latency for HFT traders is always better than that for retail traders. The HFT traders always exploit their latency advantage vs retail traders.

The argument from the exchanges – to get the same quote latency as HFT traders, pay the high prices for direct quote feeds.



Tags: SIP latency, SIP feed latency, HFT vs retail traders, root cause for NASDAQ trading halt