Why Trades Can Occur Without Visible Quotes and How Crossed Markets Arise

# Answer by quantinho (score 1)


# Tick data-why the ask price and ask volume are 0, but the trade price exists and the trade price is still big? How to understand this?












How to understand the trade price and volume exists when ask price and volume are 0 but bid ones exist? I can't understand what happens under such condition? And also why sometimes bid price is higher than ask price? Thanks

## Answer by quantinho (score 1)

https://quant.stackexchange.com/a/77511

There are orders that do not go to the orderbook. For example, if "Time In Force" of the order is "Immediate Or Cancel", the order gets filled only when there's a matching price. Now, suppose orderbook is empty but someone is continuously shooting IOC orders. When a new order arrives and matches with IOC then trade happens and nothing shows in orderbook. It is also possible that someone is trying to intercept orders before they appear in orderbook.

What you see in the orderbook is just a fraction of what is happening/could happen behind the seen. Designated Market Makers have certain privileges that other participant do not have, so you should look that up.

Bid price cannot be higher than ask price (by definition if a market marker is present a trade should happen). If it happens, probably there's some technical issue (data feed, UI, or out of order mismanagement either by server or client).

## Answer by Mahavir Bhattacharya (score 1)

https://quant.stackexchange.com/a/79149

The bid price exceeding the ask price cn happen in crossed markets.

It can happen where the order queuing isn't based on price time priority.

You can check here: https://capital.com/crossed-market-definition.

There's also a research paper mentioned in the above post, the link for which is this: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=610584.

## Answer by databento (score 1)

https://quant.stackexchange.com/a/80706

First it depends on the data feed, venue, and/or vendor's specific implementation, so we can't give you a concrete answer. I can however give you many likely scenarios.

> How to understand the trade price and volume exists when ask price and volume are 0 but bid ones exist?

Some possible situations:

- The vendor may use a feed that has odd lot trades (reported on SIPs) but no odd lot quotes (not reported on SIPs).

- The venue or vendor may be publishing an asynchronous quote feed vs. trade feed, that are timestamped on different reference clocks.

- The venue may publish trades that lag the quotes for anonymity or other reasons.

- "Trade price" could be the last sale price that your feed might print alongside each quote update. A last sale could've taken place hours ago and now the book may be empty on one side or have no liquidity at the price it occurred.

- The feed may have gapped.

> And also why sometimes bid price is higher than ask price?

Some possible situations:

- Crossed markets may be allowed during a market halt, auction, pre-open, volatility interrupt, etc.

- Many asset classes are OTC and have counterparty arrangements that prevent a match and don't have regulations preventing crossed or locked markets.

- The feed may disseminate book updates on one side first.

- The vendor's normalization may be poorly-designed and not treating compound events as a single atomic update.