How Off-Exchange Trade Reports Can Create Candlestick Spikes

Summary

The document explains why a chart can show an isolated candlestick spike after a large price move. A reported transaction may be far from the prevailing market price because it was arranged earlier, then reported later through a trade reporting facility. The resulting print can appear at the reporting time even though it does not represent a contemporaneous exchange trade at the displayed level.

The example concerns a reported 1,800-share transaction in a US-listed equity, with a condition code indicating that it was reported through the FINRA/NYSE facility rather than executed as a regular on-exchange trade. The proposed explanation is delayed reporting or an incorrectly entered timestamp. This is a plausible interpretation of the cited record, not a universal explanation for every unusual candle; transaction condition codes and trade details are needed to assess an individual case.

Key ideas

• Off-exchange transactions reported through a trade reporting facility can appear as anomalous chart prints.
• A trade arranged before a price move may be reported only after the move.
• Transaction condition codes help distinguish regular exchange trades from other reported trades.
• An isolated spike should be investigated using the underlying trade details rather than assumed to reflect current market activity.

Tags

# Unexplained, empty candlestick spikes appear after large movements


# Unexplained, empty candlestick spikes appear after large movements












The following picture and highlight:

This happens often on large gap downs/ups, what is the reasoning for this phenomenon?

## Answer by LocalVolatility (score 4, accepted)

https://quant.stackexchange.com/a/30367

Elaborating a bit more on second comment to your question. In the below screenshot you see that there was a turnover of 1,800 shares in DB US Equity at 19:34:13. This was quite off the market prices at this time as shown in your chart.

As the condition code column shows, this was not a regular on-exchange transaction but reported through the FINRA/NYSE trade reporting facility. I.e. this is an off-exchange trade that was reported via the exchange. Most likely the deal was agreed upon before the move but reported after. Either the facility does not allow for entering the time stamp when the trade was arranged or it wasn't entered correctly.

See the FINRA webpage for details.

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.