One Million Quotes per Second Is Not Enough

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.