OrderBook 'sweep' event-depth update nuances needed

jelite · Jul 7, 2013

Quote from rwk:

I was reading through some old related threads on ET, and that triggered a realization. I think what I overlooked is that the hidden size is probably coming from stops being elected. There could be new orders arriving, but more likely it is from stops. When a stop is elected, in most cases it becomes a marketable limit order immediately (i.e. with no change in the timestamp).

When a stop is triggered, it would add to the pressure but here someone provided additional liquidity (absorbed a stop order), so the additional liquidity is not caused by stops being triggered but rather by them being aware of the situation (and possibly anticipating a reversal).

I don't necessarily agree with ofthomas that you can only use this info if you are LL/ULL. This info can be used even if you can't act on it in that precise moment.

rwk · Jul 7, 2013

Quote from jelite:
I don't necessarily agree with ofthomas that you can only use this info if you are LL/ULL. This info can be used even if you can't act on it in that precise moment.

That's what I am trying to find out. There are a lot of folks, especially here at ET, who say that analysis of market depth is useless, especially with sampled or conflated data. I'm still not convinced. And I have no intention of buying an expensive data feed, nor of co-locating, to compete in the low-latency HFT space. My business model calls for keeping overhead low and pursuing opportunities that don't scale well.

rwk · Jul 7, 2013

Quote from jelite:
When a stop is triggered, it would add to the pressure but here someone provided additional liquidity (absorbed a stop order), so the additional liquidity is not caused by stops being triggered but rather by them being aware of the situation (and possibly anticipating a reversal).

Well, I posted late last night when I wasn't thinking clearly. Of course, stops getting triggered will add to buying pressure in an up-move. I guess what I was thinking of are limit-if-touched (LIT) orders to sell. But now I see that Globex offers Maximum Quantity Display (MaxShow) that will also hide supply.