MarketDepth question

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1

Imported from previous forum

2

In a non-aggregated book using MDPriceLevel and MDEntryPositionNo to order bids and offers does MarketDepth refer to the number of price levels or the number of bids or offers?

So if I have a book like this:

bid

10 @ 12.50
100 @ 12.50
50 @ 12.25
25 @ 12.25
40 @ 12.10

and someone specifies MarketDepth = 3 do I give them all the bids (for the three price levels 12.50, 12.25 and 12.10) or the top three bids (10 @ 12.50, 100 @ 12.50 and 50 @ 12.25)?

Thanks

3

IMHO, aggregated would be
110@12.5, 75@12.25 40@12.10
non-aggregated would be
10@12.5,100@12.50,50@12.25

In a non-aggregated book using MDPriceLevel and MDEntryPositionNo to order bids and offers does MarketDepth refer to the number of price levels or the number of bids or offers?

So if I have a book like this:

bid

10 @ 12.50
100 @ 12.50
50 @ 12.25
25 @ 12.25
40 @ 12.10

and someone specifies MarketDepth = 3 do I give them all the bids (for the three price levels 12.50, 12.25 and 12.10) or the top three bids (10 @ 12.50, 100 @ 12.50 and 50 @ 12.25)?

Thanks

4

Hi,

I would tend to the opposite solution - to always provide the 3 price levels, regardless of the number of individual entries that occur in a non-aggregated book.

So I would deliver 10 @ 12.50, 100 @ 12.50, 50 @ 12.25, 25 @ 12.25 and 40 @ 12.10

This is because in a highly liquid security, there may well be a large number of bids at the touch - so delivering only the first 3 bids could mean that they were all at the same price and the information would be meaningless.

Cheers,
George.

IMHO, aggregated would be
110@12.5, 75@12.25 40@12.10
non-aggregated would be
10@12.5,100@12.50,50@12.25

In a non-aggregated book using MDPriceLevel and MDEntryPositionNo to order bids and offers does MarketDepth refer to the number of price levels or the number of bids or offers?

So if I have a book like this:

bid

10 @ 12.50
100 @ 12.50
50 @ 12.25
25 @ 12.25
40 @ 12.10

and someone specifies MarketDepth = 3 do I give them all the bids (for the three price levels 12.50, 12.25 and 12.10) or the top three bids (10 @ 12.50, 100 @ 12.50 and 50 @ 12.25)?

Thanks

5

Agree totally with you that a number of bids at each level can exist and sending only 3 from the first level conveys no meaningful information to the user.

But, following you example, what if there are 50 bids at each of the 3 levels ? We would then send back 150 groups for the request. Not ideal for most OMS.

Thats probably why prices are aggregated.

I guess its like all things FIX, counter-parties agree on the ‘rules of engagement’ and highlight the deficiencies.

Is there a valid reason not to have an aggregated orderbook ?

Hi,

I would tend to the opposite solution - to always provide the 3 price levels, regardless of the number of individual entries that occur in a non-aggregated book.

So I would deliver 10 @ 12.50, 100 @ 12.50, 50 @ 12.25, 25 @ 12.25 and 40 @ 12.10

This is because in a highly liquid security, there may well be a large number of bids at the touch - so delivering only the first 3 bids could mean that they were all at the same price and the information would be meaningless.

Cheers,
George.

IMHO, aggregated would be
110@12.5, 75@12.25 40@12.10
non-aggregated would be
10@12.5,100@12.50,50@12.25

In a non-aggregated book using MDPriceLevel and MDEntryPositionNo to order bids and offers does MarketDepth refer to the number of price levels or the number of bids or offers?

So if I have a book like this:

bid

10 @ 12.50
100 @ 12.50
50 @ 12.25
25 @ 12.25
40 @ 12.10

and someone specifies MarketDepth = 3 do I give them all the bids (for the three price levels 12.50, 12.25 and 12.10) or the top three bids (10 @ 12.50, 100 @ 12.50 and 50 @ 12.25)?

Thanks

6

Price levels refers to prices and not to orders. Please refer to http://fixprotocol.org/documents/4419/MDOWG_Book_Mgt_Final_draft.doc, Chapter 4.4 where you can see an example of an order depth snapshot. PriceLevel remains the same if the price does not change. MDEntryPositionNo can give you the relative priority of the order within the price level.
With 50 bids at each of the 3 levels you would indeed get 150 entries. However, a market having this amount of liquidity is unlikely to be offering an order depth view of the market.
You asked for a reason for order depth. One example are complex orders (aka multileg orders or strategies) for user-defined instruments which tend to be much lower in volume. Other examples are hit and take markets for less liquid instruments or non-anonymous markets where you want to convey the counterparty in the market data (parties cannot be aggregated).
Regards,
Hanno.

Agree totally with you that a number of bids at each level can exist and sending only 3 from the first level conveys no meaningful information to the user.

But, following you example, what if there are 50 bids at each of the 3 levels ? We would then send back 150 groups for the request. Not ideal for most OMS.

Thats probably why prices are aggregated.

I guess its like all things FIX, counter-parties agree on the ‘rules of engagement’ and highlight the deficiencies.

Is there a valid reason not to have an aggregated orderbook ?

Hi,

I would tend to the opposite solution - to always provide the 3 price levels, regardless of the number of individual entries that occur in a non-aggregated book.

So I would deliver 10 @ 12.50, 100 @ 12.50, 50 @ 12.25, 25 @ 12.25 and 40 @ 12.10

This is because in a highly liquid security, there may well be a large number of bids at the touch - so delivering only the first 3 bids could mean that they were all at the same price and the information would be meaningless.

Cheers,
George.

IMHO, aggregated would be
110@12.5, 75@12.25 40@12.10
non-aggregated would be
10@12.5,100@12.50,50@12.25

In a non-aggregated book using MDPriceLevel and MDEntryPositionNo to order bids and offers does MarketDepth refer to the number of price levels or the number of bids or offers?

So if I have a book like this:

bid

10 @ 12.50
100 @ 12.50
50 @ 12.25
25 @ 12.25
40 @ 12.10

and someone specifies MarketDepth = 3 do I give them all the bids (for the three price levels 12.50, 12.25 and 12.10) or the top three bids (10 @ 12.50, 100 @ 12.50 and 50 @ 12.25)?

Thanks