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How Rigged Are Stock Markets?: Evidence From Microsecond Timestamps

Robert P. Bartlett, III and Justin McCrary

No 22551, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use new timestamp data from the two Securities Information Processors (SIPs) to examine SIP reporting latencies for quote and trade reports. Reporting latencies average 1.13 milliseconds for quotes and 22.84 milliseconds for trades. Despite these latencies, liquidity-taking orders gain on average $0.0002 per share when priced at the SIP-reported national best bid or offer (NBBO) rather than the NBBO calculated using exchanges’ direct data feeds. Trading surrounding SIP-priced trades shows little evidence that fast traders initiate these liquidity-taking orders to pick-off stale quotes. These findings contradict claims that fast traders systematically exploit traders who transact at the SIP NBBO.

JEL-codes: G10 G15 G18 G23 G28 K22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-mst
Date: 2016-08
Note: AP CF LE
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