Defining Quote Changes and Trade Counts for Quote-to-Trade Ratios

Summary

The discussion clarifies the basic counting units behind quote-to-trade statistics. A displayed quote consists of bid and ask prices together with their sizes. A change to any one of those four values can be counted as a quote change, so the measure depends on the convention used by the data source or analyst.

Trades are execution events, and one incoming liquidity-taking order may match against several resting orders, producing multiple trade records. The answer therefore distinguishes a quote-to-trade ratio from an order-to-trade ratio and points to market data and microstructure references as places to examine such measures. It does not supply a universal rule for whether quote removals count, nor does it give a complete calculation procedure or empirical example. The main lesson is to define event granularity and counting rules before comparing ratios across venues or datasets.

Key ideas

• A quote comprises bid and ask prices and their displayed sizes.
• A change in any one of those quote fields may be counted as a quote change.
• A single liquidity-taking order can generate multiple trade records when it matches several resting orders.
• Quote-to-trade and order-to-trade ratios are distinct measures.
• Comparisons require explicit counting conventions for quote updates and executions.

Tags

# Determination of Quote / Trade Ratio


# Determination of Quote / Trade Ratio












What is the common criteria used to count a quote or trade in reference to the quote/trade ratio?

Criteria:

- If it beats the best bid or offer.

- If it adds size to the best bid or offer.

- What if the best bid or offer is removed? Does this count or not?

There may be some other criteria I am missing - please do include them if you find one.

## Answer by lehalle (score 1)

https://quant.stackexchange.com/a/16998

First define a quote: this is the bid and ask (price and volume). when any of them 4 change, it is said the quote changed. We all know what a trade is (nevertheless note if you send a liquidity consuming order of 100 on a queue made of 50+20+30, it generates 3 trades).

You can play with statistics (like order-to-trade ratio, not quote-to-trade), on te SEC's MIDAS web site:

Here is an example of QoT ratio over one day from the NANEX web site:

For more on all these indicators and their meaning, have a look at Market Microstructure in Practice.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.