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Interpreting Tick Quotes and Bid–Ask Spreads

Article Quant Q&A · Author: Parzival
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Summary

The document raises questions about how to interpret tick records from a trading platform. It contrasts a sell quote at one time with a buy quote at another and asks whether both can coexist, whether repeated quotes represent the same order, and how to calculate the bid–ask spread when one side is absent. These questions point to the importance of understanding what each record represents and how quote timestamps relate.

A spread is calculated from bid and ask prices available at the same time for the same instrument and venue or feed. Quotes recorded at different times should not be paired as if they were simultaneous, and a missing side means the spread cannot be calculated from that record alone. The document provides no data schema, venue details, or answer explaining the platform’s records, so the precise cause of the apparent mismatch remains unresolved.

Key ideas

  • A bid–ask spread uses contemporaneous bid and ask quotes for the same instrument.
  • Quotes recorded at different times cannot automatically be treated as a matched pair.
  • A record with only one side of the market does not provide enough information to calculate the spread.
  • Repeated quote values alone do not establish whether the same order or a new order is represented.

Tags

Market microstructureStatistics
Full text
# tick data: does this data look wrong? what am I missing?


# tick data: does this data look wrong? what am I missing?












I can't seem to understand how tick data works. Below is some tick data for a certain security (I got this data from a platform called MetaTrader). At 09:56:28 someone offered to sell at \$9.9. But then at 09:57:40 someone offered to buy at \$12.89. Isn't that weird? If someone is selling at \$9.9 why would you offer to buy at \$12.89?

To make it weirder, at 09:57:30 the offer to sell at \$9.9 is repeated (or maybe it's someone else's offer?) even though someone was willing to buy at \$12.89. The entire dataset is like this.

Also: when people talk about the bid-ask spread do they mean that the bid and ask prices are horizontally aligned? Like at 10:06:00, when there is a bid price of \$11.27 and an ask price of \$11.28? What would the bid-ask spread be at, say, 09:59:23, when there was an ask price (\$9.43) but no bid price?

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.