A Tour of the Order Book: ITCH Data and Graphical Representation
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1 A Tour of the Order Book: ITCH Data and Graphical Representation Nathan Woodbury Information and Decision Algorithms (IDeA) Labs Computer Science Department Brigham Young University
2 Outline Part 1: Limit Orders Part 2: The Matching Engine, the Limit Order Book, and Prices Part 3: A Tour of the ITCH Data
3 Overview of the Market u (orders) Matching Engine y (limit order book, price) Traders
4 Overview of the Market u (orders) GOOG AAPL Matching Engine y (limit order book, price) C Trader 1 + Trader 2 Trader n
5 This Talk u (orders) Matching Engine y (limit order book, price) Traders
6 Part 1: Limit Orders u (orders) Matching Engine y (limit order book, price) Traders
7 Part 1: Limit Orders Limit Order Offer to buy or sell a specified quantity of shares at a specified price u (orders) Matching Engine Traders y (limit order book, price)
8 Daily Limit Orders Basic Example Seconds since midnight (eastern time) Order Number Ticker Action Side Quantity Price GOOG Add Bid (buy) 100 $680.00
9 Daily Limit Orders Basic Example Seconds since midnight (eastern time) Order Number Ticker Action Side Quantity Price GOOG Add Bid (buy) 100 $ GOOG Cancel Bid (buy) 100 $680.00
10 Daily Limit Orders Basic Example Seconds since midnight (eastern time) Order Number Ticker Action Side Quantity Price GOOG Add Bid (buy) 100 $ GOOG Cancel Bid (buy) 100 $ AAPL Add Ask (sell) 400 $100.00
11 Daily Limit Orders Basic Example Seconds since midnight (eastern time) Order Number Ticker Action Side Quantity Price GOOG Add Bid (buy) 100 $ GOOG Cancel Bid (buy) 100 $ AAPL Add Ask (sell) 400 $ C Add Ask (sell) 200 $42.42
12 Daily Limit Orders Basic Example Seconds since midnight (eastern time) Order Number Ticker Action Side Quantity Price GOOG Add Bid (buy) 100 $ GOOG Cancel Bid (buy) 100 $ AAPL Add Ask (sell) 400 $ C Add Ask (sell) 200 $ AAPL Cancel Ask (sell) 255 $100.00
13 Daily Limit Orders Basic Example Seconds since midnight (eastern time) Order Number Ticker Action Side Quantity Price GOOG Add Bid (buy) 100 $ GOOG Cancel Bid (buy) 100 $ AAPL Add Ask (sell) 400 $ C Add Ask (sell) 200 $ AAPL Cancel Ask (sell) 255 $ GOOG Add Bid (buy) 150 $712.38
14 Daily Limit Orders Basic Example Seconds since midnight (eastern time) Order Number Ticker Action Side Quantity Price GOOG Add Bid (buy) 100 $ GOOG Cancel Bid (buy) 100 $ AAPL Add Ask (sell) 400 $ C Add Ask (sell) 200 $ AAPL Cancel Ask (sell) 255 $ GOOG Add Bid (buy) 150 $712.38
15 Part 2: The Matching Engine, the Limit Order Book, and Prices u (orders) Matching Engine y (limit order book, price) Traders
16 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 0 Start of the Day Order book begins empty 5 0 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders)
17 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 1 Sell Order Added Sell 7 shares at $ $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders)
18 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 1 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders) Sell Order Added Sell 7 shares at $9.00 Means seller is willing to sell up to 7 shares at or above $9.00
19 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 1 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders) Sell Order Added Sell 7 shares at $9.00 Means seller is willing to sell up to 7 shares at or above $9.00
20 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 2 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Buy Order Added Buy 5 shares at $1.00 Means buyer is willing to buy up to 5 shares at or below $1.00 Bids (Buy Orders) Asks (Sell Orders)
21 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 2 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Buy Order Added Buy 5 shares at $1.00 Means buyer is willing to buy up to 5 shares at or below $1.00 Bids (Buy Orders) Asks (Sell Orders)
22 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 2 Bid-Ask Spread $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bid-Ask Spread Gap between best (highest) bid and best (lowest) ask Spread = $ $1.00 = $8.00 Bids (Buy Orders) Asks (Sell Orders)
23 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 2 Bid-Ask Spread $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bid-Ask Spread Wide for now, will narrow as day progresses High-volume stocks => smaller spreads (roughly 1 cent) Low-volume stocks => larger spreads Bids (Buy Orders) Asks (Sell Orders)
24 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 3 Bid-Ask Spread $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 More Orders Added Two more orders added, a buy and sell Bid-ask spread narrows to $ $4.00 = $2.00 Bids (Buy Orders) Asks (Sell Orders)
25 QUANTITY (SHARES) Example: Matching Engine Dynamics Bid-Ask Spread TIME 3 Order Cancelled The buy order added at time 3 cancelled Cancellation is free Bid-ask spread widens again 0 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders)
26 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 10 Bid-Ask Spread $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders) Some time later Many more orders added Distribution of asks and bids on each side of spread Each bar may represent many orders Orders executed by preference of price, then time of arrival
27 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 11 Bid-Ask Spread $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders) Asks Executed Order Execution Order to Buy 4 shares at $6.00 There already exists an order to sell at this price Matching engine matches buy to sell to make a trade Ask limit order at $6.00 is partially executed
28 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 11 Bid-Ask Spread $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders) Order Execution Order to Buy 4 shares at $6.00 There already exists an order to sell at this price Matching engine matches buy to sell to make a trade Ask limit order at $6.00 is partially executed Bid-ask spread does not change
29 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 11 Bid-Ask Spread Price $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Price Determination Price is computed as the last executed trade Price now at $6.00 Bids (Buy Orders) Asks (Sell Orders)
30 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 12 Bid-Ask Spread Price $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Bids Executed Asks (Sell Orders) Order Execution Limit order to sell at $4.00, limit 16 There exists orders to buy at $5.00 and $4.00 Matching engine Walks the bids by selling 7 shares at $5.00 and the remaining 9 shares at $4.00
31 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 12 Bid-Ask Spread Price $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Price Change Price of stock changes to $4.00 (discontinuously) as a result of last trade Price is piecewise constant function of time Bids (Buy Orders) Asks (Sell Orders)
32 QUANTITY (SHARES) Example: Matching Engine Dynamics TIME 13 Price Bid-Ask Spread Another Limit Order Offer to buy at $5.00, limit 7 Bid-ask spread narrows again Price remains at last trade, which is $ $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 Bids (Buy Orders) Asks (Sell Orders)
33 The Order Book from Actual Data Citigroup: 3/7/14
34 The Order Book from Actual Data Alternate View Citigroup: 3/7/14
35 The Order Book from Actual Data Alternate View Citigroup: 3/7/14
36 Part 3: A Tour of the ITCH Data u (orders) Matching Engine y (limit order book, price) Traders
37 ITCH Data Overview ITCH Data u (orders) Execution Engine Order Book Update Matching Engine y (limit order book, price) Data feed offered by NASDAQ 1 Other exchanges offer similar services Direct feed of the changes made to the order book Incoming marketable limit orders are executed immediately Results are recorded, but original orders are not All changes to price and the order book can be computed from this data 1
38 Some ITCH Data Statistics Number of Tickers: 8,344 Raw Files: ~5 GB / Day compressed, ~11 GB / Day uncompressed for all tickers Raw = compressed binary file Processed Files: ~20 GB / Day for all tickers Processed = Human Readable CSV Smallest ticker: ~60 KB / day (~150 orders) Largest ticker: ~160 MB / day (~3,000,000 orders) So far, we have used ~50,000 processor-hours on a supercomputer to process and analyze this data
39 Citigroup (C): 3/7/14
40 Zillow (Z): 8/21/13
41 Zillow (Z): 8/21/13
42 Google (GOOG): 4/4/14
43 General Electric (GE): 2/4/14
44 General Electric (GE): 2/4/14 9:55am
45 Conclusions Matching engine takes incoming orders and updates the state of the order book ITCH Data allows us to recreate the actual order book for 8,000+ securities at any time resolution Order book data shows interesting artefacts; indicative of trading behavior
46 Questions?
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