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Chicago Board of Trade

Chicago Board of Trade

Commodity Exchange Corporation

Chicago Mercantile Exchange

Chicago Stock Exchange

End of day

foreign exchange (generic)

GLOBEX

Global Exchange

International Monetary Market

MACE

Mid-America Commodity Exchange

NASDAQ

National Association Securities Dealers

NYFE

New York Futures Exchange

NYMEX

New York Mercantile Exchange

NYSE

New York Stock Exchange

OHLC

Open, High, Low, Close price bar

OPRA

AMEX+CBOE+NYSE+PSE+PE

Pacific Exchange

Philadelphia Stock Exchange

Tick

a recorded transaction

World Wide Web

Data Production

The first stage in the life cycle of a price quote is its creation in the exchanges. Price and Volume

All market data is the result of transactions taking place at exchanges. There are many exchanges throughout the world; some are listed in the preceding glossary. Each exchange broadcasts its market data on a medium called a tape. Each tape consists of reports of each trade (a quantity of shares or contracts exchanged at a specific price at a certain time) or each quote (a change in the bid or ask) taking place at the exchange.

Amazing as this may sound, not all transactions are necessarily reported by the exchanges. It is impossible for the humans typing the information into terminals to keep up, even if they could see every transaction that occurs, which often does not happen. Even more amazing is that many pits each have only one person typing in all their trades, even during a fast market!

A data provider is a company that makes a business of selling the data received from exchanges to subscribers. Data may be combined from several exchanges and



broadcasts the information in the form of a datafeed to its subscribers. The datafeed can be delivered by phone line, satellite link, cable, radio, or the Internet, with various advantages to each medium.

Some data vendors make it their business to broadcast each and every transaction (trade or quote reported by exchanges) as packets, a tick packet or data packet. Other vendors will try to broadcast everything, but will occasionally drop changes to the bid/ask when the market is too "fast" moving. What practical consequence this has on traders depends on several factors. Does your trading strategy utilize volume analysis? If you are trading options, note that "idle" options, those that did not trade yesterday, are not reported for quote updates, even though they are for trade updates.

While daily securities volume is accurate at the end of each trading day, futures trading volume is only estimated and isnt officially released until the following day. The CME and IMM release true volume prior to the opening of the following day while the CBOT and NY markets release it mid-day. If you look in the Wall Street Journal at the futures page in section C, you will see "Estimated Volume" for the last trading day and "Final Volume" for the day before.

Some data vendors will transmit packets with the volume field set to zero whenever actual volume is unavailable. Some trading programs substitute the last available volume wherever volume arriving to your computer is quoted as zero.

Questions to Ask

Is a new tick created for each trade, or only when a trade causes a change in price?

When actual volume is unavailable, what is put into the volume field in a data packet?

How will the receiving software handle zero volume fields? Will the charting software produce fixed-time bars when no ticks occur have occurred? If so, what OHLC prices will be used?

Time Stamping

Here comes another surprising fact. Individual packets come from the exchanges with no time stamps; they do not contain the exact time of the trade. This is because data flow rate is so high that every means is taken to reduce the amount of numbers coming from the exchanges. Even at the data-vendor level, individual realtime quotes are not time-stamped. Price quotes get time-stamped at the users computer!

All securities and futures exchanges in the United States synchronize their clocks continuously with time signals derived from the National Institute of Standards and Technology (NIST) official time clocks in Fort Collins, Colorado. NIST coordinates international time reference with the International Bureau of Weights and Measures (BIPM) in Paris, jointly maintaining Coordinated Universal Time (UTC). The time



synchronization normally is extremely accurate between exchanges, with differences not exceeding very small fractions of a second.

Data vendors send this precise time to their customers approximately once a minute, depending on data stream activity. They obtain their time from one of the exchanges, but not the same exchange in each case. Time synchronization systems sometimes fail. When that happens, there can be differences in the time transmitted by different datafeed services. Time packets contain the hour, minute, and second. Time-packet transmission has lower priority than quote and news-story transmission; so time packets sometimes are skipped for a while during periods of high activity.

It is the users receiving software that time stamps each trades tick as it arrives. Some software programs stamp the quotes with a time clock thats updated by the periodic time packets. Others use the computer clock time. Some software packages can be configured to set the local computer clock to datafeed time each minute when datafeed time packets are received.

It is possible for three traders, each using a different vendor, to receive the same quote and view them as having different time stamps. For example, one users software would be stamping with his computer clock and the other two are using datafeed time from services that lost mutual synchronization. In addition, because time packets are spaced about one minute apart, it is also possible that individual quotes arriving very near time interval boundaries could fall in different one-minute intervals in different computers. Despite these imperfections, the process is not as bad as it sounds, just as long as your ticks arrive the right order! The bottom line is that you and a friend could both be using the same charting software, watching the same market, and have different one-minute bars on the screen, all because your data vendor is not the same as your friends.

Question to Ask

What are the options available for configuring the data server software to time-stamp incoming packets?

Delayed Data

To increase availability of tick data to the public, quote data is offered in another type of service at much lower cost, but with one caveat: it is not guaranteed to arrive at your site within a specified period of time. This service is commonly referred to as delayed data, and typically arrives 10 to 20 minutes after the fact.

Curiously, there appears to be no uniform definition among the exchanges for "delayed data." In fact, they prefer not to use that term at all. To demonstrate the sensitivity with which some of the exchanges guard their position, questionnaires were sent out in connection with the construction of a data dictionary, soliciting their proposed definitions of "real-time data," and some exchanges refused to respond.



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