07/21/2011 - One Million Quotes per Second Is Not Enough Back to Main Research Page One million quotes/second is just not enough, apparently. On July 5th, CQS capacity was increased 33% to 1 million quotes/sec. On July 21, at 12:50:15, a sudden move in the market jammed it completely full -- saturating and delaying for at least 300ms. What should be disturbing  is becoming the new normal. Events like this make it very clear that the NBBO from the SIP has no meaning which we have gone into detail in this report. The first chart shows the NBBO for SPY as determined by CQS. The lines are shaded yellow if the NBBO was locked during the interval. The lines are shaded red if the NBBO was crossed during the interval. Note how suddenly the spread widens from a penny. The average bid/ask spread for the data in this chart is very close to a penny, but you can see how misleading that would be. The charts that follow, show quotes from 2 of the 9 market centers that report into CQS. Note how the red lines lag the black lines in the first drop, and then lead in the second drop. Then note the charts showing trade executions (red and black dots). With light to no news, we see that system capacity can be overwhelmed in less than a second. We wonder how the system has any chance of functioning after receiving significant news. SPY 1 second interval showing NBBO range SPY 5 ms interval, showing quotes from 2 market centers SPY 5 ms interval, showing quotes and trades from 2 market centers Closeup #1: Closeup #2: Closeup #1 w/Trades: Closeup #2 w/Trades: Inquiries: pr@nanex.net Publication Date: 07/22/2011 http://www.nanex.net This report and all material shown on this website is published by Nanex, LLC and may not be reproduced, disseminated, or distributed, in part or in whole, by any means, outside of the recipient's organization without express written authorization from Nanex. It is a violation of federal copyright law to reproduce all or part of this publication or its contents by any means. This material does not constitute a solicitation for the purchase or sale of any securities or investments. The opinions expressed herein are based on publicly available information and are considered reliable. However, Nanex makes NO WARRANTIES OR REPRESENTATIONS OF ANY SORT with respect to this report. Any person using this material does so solely at their own risk and Nanex and/or its employees shall be under no liability whatsoever in any respect thereof.