3 JAN 2014

How Slow is the NBBO?

A COMPARISON WITH DIRECT EXCHANGE FEEDS AUTHORS: SHENGWEI DING, JOHN HANNA, TERRENCE HENDERSHOTT

 


This paper provides evidence on the benefits of faster proprietary data feeds from stock exchanges over the regulated “public” consolidated data feeds. We measure and compare the National Best Bid and Offer (NBBO) prices in each data feed at the same data center. Price dislocations between the NBBOs occur several times a second in very active stocks and typically last one to two milliseconds. The short duration of dislocations makes their costs small for investors who trade infrequently, while the frequency of the dislocations makes them costly for frequent traders. Published in the Financial Review.

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