Back to Legal Limit Algo Contents While the Legal Limit algo runs fairly close to the actual NBBO distance thresholds, it's not perfect. The algo does not adjust the distance threshold in real time as the NBBO moves but rather, it will make very few adjustments throughout the day. Once an adjustment is made the price level continues to flatline until another level adjustment is made or the trading day ends. The charts shown below are 1 second charts, with each point representing the last quoting price of the 1 second time slice. Click on any chart for a high resolution image. Symbol NOC, NORTHROP GRUMMAN. 06/28/2011. As NOC is in the Russell 1000, after 9:45 AM its BBO distance threshold is 8%. At 9:45 AM we see the bid adjust to the current NBBO and then flatlines until 3:35 PM (even though the actual distance threshold changes significantly), when the 8% distance threhold is removed. The ask price makes one adjustment after 9:45 AM and then also continues to flatline until 3:35 PM.  Symbol WNR, WESTERN REFINING. 06/30/2011. In this chart, we see the distance level flatline up through 10:30, then adjust to the NBBO and continue to flatline at the new level.  Symbol JBHT, JB HUNT TRANS. 07/01/2011. As JBHT is in the Russell 1000, after 9:45 AM its BBO distance threshold is 8%. At 9:45 AM we see the bid adjust to the current NBBO and then flatlines until 3:35 PM (even though the actual distance threshold changes significantly), when the 8% distance threhold is removed. The ask price makes one adjustment after 9:45 AM and then also continues to flatline until 3:35 PM.  Because of this, many of the detailed charts shown in this article appear to have the actual quote price go beyond the actual threshold or be inside the actual threshold (which they are). It is only when the algo decides to adjust the quote price to a new distance level based on the NBBO that the two (quote price and distance threshold) match identically.
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