Equity Valuation and Portfolio Management

HOW IS HIGH-FREQUENCY DATA RECORDED?

The highest-frequency data is a collection of sequential “ticks,” arrivals of the latest quote, trade, price, order size and volume information. Tick data usually has the following properties:

• A timestamp
• A financial security identification code
• An indicator of what information it carries:
  • Bid price
  • Ask price
  • Available bid size
  • Available ask size
  • Last trade price
  • Last trade size
• Security-specific data, such as implied volatility for options
• The market value information, such as the actual numerical value of the price, available volume, or size

A timestamp records the date and time at which the quote originated. It may be the time at which the exchange or the broker-dealer released the quote, or the time when the trading system has received the quote. At the time this article is written, the standard “round-trip” travel time of an order quote from the ordering customer to the exchange and back to the customer with the acknowledgement of order receipt is 15 milliseconds or less in New York. Brokers have been known to be fired by their customers if they are unable to process orders at this now standard speed. Sophisticated quotation systems, therefore, include milliseconds and even microseconds as part of their timestamps.

Another part of the quote is an identifier of the financial security. In equities, the identification code can be a ticker, or, for tickers simultaneously traded on multiple exchanges, a ticker followed by the exchange symbol. ...