How Rigged Are Stock Markets?: Evidence From Microsecond Timestamps

Robert P. Bartlett; III; Justin McCrary

doi:10.3386/w22551

How Rigged Are Stock Markets?: Evidence From Microsecond Timestamps

Robert P. Bartlett, III & Justin McCrary

Working Paper 22551

DOI 10.3386/w22551

Issue Date August 2016

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.

Neither author has any financial interest or affiliation (including research funding) with any commercial organization that has a financial interest in the findings of this paper. The authors are grateful to the University of California, Berkeley School of Law, for providing general faculty research support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
MARC RIS BibTeΧ

How Rigged Are Stock Markets?: Evidence From Microsecond Timestamps

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