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Why Consolidated Equity Books Can Show Locked or Crossed Quotes

Article Quant Q&A · Author: Michael
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Summary

The document discusses building a consolidated limit order book from direct feeds when one venue’s bid matches or exceeds another venue’s ask. Such locked or crossed quotes can arise from latency differences between exchange locations, so their presence does not by itself prove that event processing is out of order.

The brief replies recommend reconstructing the book separately for each venue and treating the national best bid and offer as a separate matter. One also suggests consulting the consolidated tape if locking or crossing persists for several seconds, while keeping that step outside the book-building process. These are practical pointers rather than a detailed reconstruction procedure: the document does not specify sequencing rules, feed recovery logic, or how to resolve every transient inconsistency.

Key ideas

  • Latency between exchange locations can produce locked or crossed quotes in a consolidated view.
  • A locked or crossed consolidated market does not alone establish that feed events were processed out of order.
  • Reconstruct each venue’s book separately, and handle the national best bid and offer as a distinct layer.
  • The replies offer limited guidance and do not define a full feed synchronization procedure.

Tags

EquitiesMarket microstructureExecutionUS markets
Full text
# Locked/crossed prices in US equities


# Locked/crossed prices in US equities












I'm trying to build a consolidated LOB from several direct feeds.

However, there are many instances in which for a given stock, the bid price in one venue equals or crosses the ask price in a different venue.

Is that a valid state or do I have an issue with out-of-order event processing across the different feeds? In such case, what's the best way to "fix" the LOB back to a valid state (e.g. ignore the locking/crossing event, remove the locked/crossed prices)?

## Answer by LazyCat (score 0)

https://quant.stackexchange.com/a/34365

It is possible to observe it due to the latency between different exchange locations. You may try to fall back on SIP if it persists for more than a few seconds, though probably that part should be outside of your LOB construction.

## Answer by flashhack (score -1)

https://quant.stackexchange.com/a/34372

Generally you want to rebuild the book venue by venue. NBBO is a different story.

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.