On October 9, 2013, the SEC made new market structure data and analysis tools available at a special section of its website. The new section will serve as a central location where the agency can “publicly share evolving data, research, and analysis as [it] continues its review of the equity of market structure.”
Earlier this year, the SEC unveiled its internal Market Information Data Analytics System (MIDAS), which for the first time provided the SEC with information about every displayed order posted on national exchanges. Each day, MIDAS collects one billion records time-stamped to the microsecond.
The information comes from the consolidated tapes and proprietary feeds of each exchange and includes posted orders and quotes, modifications and cancellations, and trade executions both on- and off-exchange.
The SEC developed and launched MIDAS in large part in response to the the difficulty it had sorting out what had happened in the “flash crash” of May 2010. At that time, agency officials came to the painful realization that even small trading firms had more sophisticated market analysis tools than they did, and so hired one of them, called Tradeworx, to design a system for them that would, among other things, track high frequency trading.
MIDAS brought SEC market technology into the 21st century, and now the agency is making some of that technology available to the general public at its website. According to the on-site introduction, anyone can “review current staff market structure research, use interactive data visualization tools to explore a variety of advanced market metrics…, download dozens of datasets to perform your own analyses, and further the dialogue through public feedback.” Staff research papers are also made available.
The data available at the site include:
Ratios related to the number and volume of orders that are canceled instead of traded.
Percentage of on-exchange trades and volume that are not disseminated on the public tape (odd-lot trades).
Percentage of on-exchange trades and volume that are the result of hidden orders.
Quarterly distributions analyzing the lifetime of quotes ranging from one millionth of a second to one day.
The material is complex, and will not help ordinary investors trade their securities. But the presentation is clear and quite interesting. There are charts with names like “Hazard, Survivor and Cumulative Distribution: Large Stocks.” Fortunately, there’s a helpful link that takes the viewer to an explanation of “quote life methodology.”
Market junkies are bound to find the new site fascinating. Eventual public discussion should be helpful both for the SEC and for interested observers.
Now everyone can form an idea of what kind of tools the SEC is using to detect potential dangers that could result in another flash crash or similar event.
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