"LMM – CME Designated Lead Market Makers are each allocated a configurable percentage of an aggressor order quantity before the remaining quantity passes to the next step."
Certain matching algorithms allocate orders to LLM before considering FIFO - specifically algorithm T (LMM w/o Top). So I guess it depends on how strict is your definition of "FIFO order queue".
Thank you! I know that NASDAQ and CME also have designated market makers, but I couldn't find any specific privileges they have over non-market makers, apart from the different fee schedules. Is the ability of NYSE designated market makers to handle order fills a common practice across other exchanges?
No, that's why the project focuses more on cryptocurrency, which offers easier access to data and the market. I'm trying to understand trad-fi markets and implementing L3 market-by-order backtesting using Databento data, but creating a live bot without the market access would be impossible.
Interactive brokers is probably the best non-professional setup I’m aware of. You won’t get hft level latencies or price feeds.
to get good historical data in “trad-fi” you would need to map all the trades by code to filter out bad ticks before aggregating into bars. This alone is enough of a barrier to keep most retail traders out of the space
databento provides high-quality market-by-order data at a reasonable price, so at least I can play with the data, though I'm unsure about actual trading. That's why people including me like crypto.
from what I understand, databento is just aggregating exchange data. They must have some deal for processed data. Their MBO data is not cheap and they don't have much history. I would not trust their bars without a whitepaper documenting how they clean each market.
No. The major concern is that bad ticks make it through your filters, which is more than likely going to make your models do something wonky.
It's been many years since I worked on cleaning data but essentially each event you receive is mapped to a code. Depending on your data provider, those codes may change at any time. Thomson Reuters is/was quite notorious for this. Maybe after Refinitiv spun out they cleaned up that mess but from what I have heard it is unlikely.
Sadly, it is becoming more like trad-fi. In the past, anyone could receive rebates for market making, but these days, only high-tier traders, trading companies, can benefit from them. The tier hurdle is getting higher. Also, there are now different APIs and limits for individual traders and high-tier trading companies.
I partly agree with you. Firstly, this is primarily a backtesting tool, allowing you to test under different latency setups. The example in the project demonstrates its use. Secondly, crypto exchanges is slow. Even though they provide low-latency APIs to higher-tiered traders, but I believe they are still slower compared to trad-fi. But, the market data is public, there might be differences in the data received by higher-tiered traders. These enable individuals to analyze the market and start projects like this.
