How To Shut Down Retail Trading

Via Nanex, On January 8, 2013 there were two separate events where an exchange stopped disseminating quotes, which caused the last quote sent from that exchange to lock (bid price equals ask price) or cross (bid price is greater than ask price) the NBBO (National Best Bid/Offer) when market prices moved higher or lower on other exchanges. Crossed quotes cause many problems for wholesalers (who internally match orders), order-routers, traders, financial web-sites, business news channels, and any of the 2.5 million subscribers that use the consolidated quote to analyze stock prices. From IWM to HLF, the crosses (and thus integrity of the consolidated feed) were everywhere. Market Stability In August 2012, we made a fascinating discovery: whenever the NBBO crosses in a stock, several dark pools will stop reporting trades and wholesalers (internalizers) will stop matching customer orders (yo...