CQS transmits on 12 multicast lines in order to distribute the processing load.
The capacity guidelines, expressed in quotes per second, are as follows:
| Capacity (Quotes per Second)
|
per multicast line |
all 12 multicast lines |
| Before July 5, 2011 |
75,000 |
750,000 |
| Starting July 5, 2011 |
100,000 |
1,000,000 |
The following charts plot each of the 12 individual CQS multicast lines and the
total (which is divided by 10 to fit into the same scale) on a 1 millisecond
basis.
The first chart shows one micro-burst of activity as it occurred on July 5th,
2011, which is the first day after CQS capacity was increased by 33% to 1 million
quotes/second. The second chart shows how this same data might look if we
imposed the capacity limits that were in effect prior to this trading day.
As you can see, the delay is significant. If this activity level occurred using
the limits that existed on July 1st, the delay would have lasted approximately 200ms.
We came up with three possible explanations:
1. July 5th just happened to be 33% more active than any trading day in history.
2. The capacity limits from before July 5th were at least 33% too low.
3. An algo is testing how much more quote noise it needs to generate to cause the
same effect as before.
So where does it end? CQS is already planning to increase capacity an additional 25%
in October 2011. How long before that limit is hit ? We think it will be hit the very
next trading day. If 3 years ago someone told us that equity quote traffic rates for
NYSE, AMEX and ARCA issues would exceed 1 Million/second (not even counting Nasdaq
stocks), we would have thought the market would have entered the greatest bull or
bear market ever known. Instead, you can't even recognize from a 1 minute chart where
these bursts of out-of-control quote traffic rates occur. And when they do occur,
a significant percentage of those quotes will have already expired before they even
leave the exchange network.
At these rates of growth, we will no longer have a diversity of trading participants
with accurate market data, and regulators will have no hope of ever piecing together
what happened after the next disaster. It took the SEC five months just to assemble
equity data to analyse the flash crash. When the next disaster strikes, they will
have to contend with 5 to 10 times more data.
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