Top-of-Book Analysis - Identifying and Understanding Trading Behaviours

Machine gunning, EA activity, latency arbitrage and dealing not full (or sweeping) can be identifiable from the top of book view.

Machine gunning

Machine gunning (skimming the top of book rather than paying full Volume Weighted Average Price) is identifiable by a number of smaller orders sent in quick succession, in top-of-book the orders will look a lot like the below:

Compass has Liquidity Reduction controls to help manage accounts utilising this strategy.

Echo also helps to identify potential machine gunning events through the machine gun analysis tool.

latency arbitrage

The top of book screen is also a good way to spot latency in pricing models and the counterparties taking advantage of the stale prices.

Overlaying LP market data allows you to see which LPs pricing is stale - if your rate is slow to react to market moves it is left vulnerable to latency arb traders.

Where a rate is slow to move and traders take advantage, you will be able to see a clustering of trades. Clicking the counterparty ID allows you to jump out into yield profiles to further analyse the behaviour.

← Back to: Filtering by Counterparty | Next up: Investigating Specific Trades →

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