How Rigged are Stock Markets?: Evidence from Microsecond Timestamps

55 Pages Posted: 22 Aug 2016 Last revised: 13 Feb 2022

See all articles by Robert P. Bartlett

Robert P. Bartlett

Stanford Law School

Justin McCrary

Columbia University - Law School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2016

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.

Suggested Citation

Bartlett, Robert P. and McCrary, Justin, How Rigged are Stock Markets?: Evidence from Microsecond Timestamps (August 2016). NBER Working Paper No. w22551, Available at SSRN: https://ssrn.com/abstract=2827476

Robert P. Bartlett (Contact Author)

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Justin McCrary

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National Bureau of Economic Research (NBER)

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