TT Score

Cross Trading

Cross Trading

A cross trade occurs when a buy order and a sell order for the same instrument are entered for different accounts under the same management, such as a broker or portfolio manager. To ensure that all market participants have a fair chance to trade at a price, exchanges impose minimum delays between such transactions. A cross trade is potentially illegal when both sides of the trade occur within the delay period.

Scoring methodology

TT Score identifies opposing buy and sell orders placed for the same instrument at the same price. When it finds a matching set of orders, TT Score determines the length of time between the orders.

Score interpretation

TT Score assigns the following risk scores for cross trades:

  • 0 — The delay time is sufficient, so the cross trade is considered legal.
  • 95 — The delay is insufficient and the trades were made with the same trader ID and different accounts, so the trade has a high probability of being an illegal cross trade.
  • 87 — The delay is insufficient and the trades were made with different trader IDs and accounts, so the trade could be a random cross trade within the firm or an illegal cross trade.

Identifying cross trading

The Cluster Scorecard shows activity that could indicate a cross trade. Use this scorecard to get a closer look at the activity that triggered the cross trading score.

In the following image, Audit Activity shows:

  1. Fills were executed on opposite sides of the market for the same order quantity.
  2. The two transactions were executed within the same millisecond.
  3. The two transactions were executed using different accounts.
  4. The two transactions were executed with different trader IDs or the same trader ID.