Visualizing Market Topology: Video Of Real-Time Exchange Routing

Tyler Durden's picture

Shortly we will present our take on Nanex' most recent observations on the broken equity markets, the gist of which is that the key premise behind Reg NMS: the NBBO (National Best Bid and Offer) principle which requires brokers to execute customer trades at the best available ask price when buying securities, and the best available bid price when selling securities, is now flagrantly ignored and is being abused. This is due to the encroachment of HFT which makes enforcement of NBBO regulations virtually impossible. This finding should be enough to discredit the whole premise of fair and efficient markets. And while we will discuss this more in depth shortly, below we wanted to present a stunning visualization of what really happens each and every second in our massively fragmented markets.

Video 1: visualizing exchange routing.

In the video above, orders come in from outside the circle represented by triangles. The color of the triangle matches the reporting exchange it came from. Each box on the outer edge is a different reporting exchange. The bigger triangle represent quotes at the National Best Bid Offer, NBBO. An order comes into an exchange, is processed internally and then sent out to all other exchanges and CQS.

A real-life version of the generic video above can be seen below.

Video 2: Visualization of Exchange Routing of GE during Flash Crash on May 6th, 2010:

And now you know the actual topology of what happens each time you place an order to buy or sell.


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Michael Victory's picture


and when the system expieriences a disruption.. chaos.


ThoughtCriminal's picture

wait 'till an EMP hits this thing

ThoughtCriminal's picture

yep, poof! "all your market exchanges are belong to us"

why i think this is a national security issue, not just a criminal one

hbjork1's picture


Thanks for the very intersting post.  And to whoever did the work.  "Ye shall know the truth and the truth shall set you free."

Gold and silver we have but we can't eat it.  Hopefully, one of these days, someone will be offering a farmland ETF.  

fbrothers's picture

Fixed and rigged, that is how Wall Street works. Better odds in Vegas.

SheepDog-One's picture

Really just upgraded 'Space Invaders' video game.

StychoKiller's picture

Yeah, I was wondering if you still get 1000 bonus points for destroying the saucer as it flies across the top of the screen. :>D

chumbawamba's picture

Tron is better.

I am Chumbawamba.

hbjork1's picture

Where is this "Tron" anyway.  Is it in Mexico or one of the Disney parks?

Sandy15's picture

When the guy at the NY Fed gets carpal tunnel from pushing button on bid prices, all hell will break lose.  Market will lose 2000 plus points in a week or so.

gguillory75's picture

Seriously, what conclusions are we supposed to draw from the pretty videos?  This is of no value to me whatsoever.

ThoughtCriminal's picture

use your (criminal) imagination; sky is the limit

Tyler Durden's picture

Did you read the first sentence, or were you just looking for the value to you?

Fukushima Sam's picture

Your legendary run-on sentences can leave some with glazed eyes by the end and often require re-reading.

More_sellers_than_buyers's picture

So in summary... The last sale of an equity has absolutly no relation to the underlying company. What a future..sigh

illyia's picture

Might mention Denninger's coverage for those boys and girls too tough to figure it out for themselves.

Hint: Use the YT link and slow it way down in full-size HD.

divide_by_zero's picture

Keep your eye on the triangle size coming into the various exchanges. Not many bigguns(NBBO) compared to the activity going on was my takeaway.

Rynak's picture

Information takes time to travel distances. Similarily, sending requests from one exchange to all other exchanges, takes time. What happens, when the processing speed of the individual exchanges is hundreds of times faster, than the time it takes to get the best available price from other exchanges?

Phrased in more simple terms: What happens, when stuff changes so quickly, that you lose track of the state of things?

Another analogy: Remember those HFT algo's being able to trade and react much faster than you as a human can react? That they can totally change the market in a fraction of the time it takes you do even realize the change? That is what also is going on here with the exchanges: Individual exchanges change much faster, than they can update their knowledge about each other.... desynchronization.

MonkeySmoke's picture

Can you say "criminals", I knew you could.

ThoughtCriminal's picture

Nice work, but how comes the visual of the network is in pentagram (Baphomet) forms

(don't forget: with the right kind of money, anything can be made legal)


Blotsky's picture

Funny, after a couple of seconds, I noticed that also. Who really runs things.

ThoughtCriminal's picture

"it's the Devil's work, i tell ya!"

ThoughtCriminal's picture

yeah, where's the WmBonzai7 guy? hey will i am bonzai 7; can you overlay(underlay) a Baphomet graphic on this diagram... people gotta understand who's runnin' this show:

"pleased to meet you, hope you guessed my name, huu, huu ...but what's troublin' you is the nature of my game, ..."

Hard1's picture

Very colorful, but I can't see the bigger triangle!

Come on, let your colors burst
Make 'em go "Oh, Oh, Oh"
You're gonna leave 'em falling down-own-own

Mec-sick-o's picture

People just trying to outsmart the system... as if it went unnoticed, until they break the toy.

I'm wondering why is it so pervasive lately? 

ThoughtCriminal's picture

wasn't this a game in a 1980's video arcade?

earnulf's picture

I think it was, can't remember the name, but you had to mine these asteroids to make bombs to take the big head thing out.    If you didn't have enough and couldn't run away, it ate you.

Oh yeah, Sinistar!!

anony's picture

Buy BMY @ 29.  Sell the 29 calls in nearest 'back' month, collect dividend, and go do something else. Bump up or down accordingly, each quarter.

Money for doing very little.

Far better than Vegas, albeit no bodacious ta-tas to smack you in the eye.



jimijon's picture

Cycles, waves, points .... compression, resonance, phase shift


crzyhun's picture


Is there or could you slow this down for my slower brain than computer as I think this is valuable?

Ricky Bobby's picture

I see a Stainless Steel Triangle, the three points are; Wall Street, DC, Media. It is such a shiny prison fence that when the peasants look outside they can not see it.

pappacass's picture

Yeah, I've just developed epilepsy

Contura's picture

Thanks, those videos opened my eyes regarding hft......but what i really want to do is closing them again.

Caveman93's picture

Not even able to compete against "Big Blue"! The market is long dead with no humans involved. Very eye opening!

Eagle1's picture

These videos clearly demonstrate that the market today is nothing more than a bunch of overpaid yuppies playing video games with each other and the loosers are the poor slobs that think they are investing.

the grateful unemployed's picture

of course the OTC is the worst. but mostly its an efficient system. buying is the easy part, after that they can do what they want with you.

Lady Heather...UNCLE's picture

Waddell and Reed control ALL that??

Mediocritas's picture

Whoever made this video (nanex?): excellent job. Trying to explain the system in words to people is damn near impossible if they're not traders, but a video really does the job. Is there a higher res version available? I can't make out the text defining which exchange is which.

Now, just paint in some parasites living in the middle between all the exchanges with their cutting edge network connectivity, monitoring quote activity at each exchange and looking for network latency (lag) between venues to provide front-running opportunities. Even if there weren't latency issues, parasites can still profit from discrepancies between venues that arise as a consequence of the half-second rule applied to quote dissemination.

And hell, if there isn't enough lag in the system to be profitable, just stuff the order queues with spam and make it.