Single-Sided Order Book Dominance occurs when a single trader's resting orders make up the majority of the disclosed volume of an instrument for either the buy or sell side of the market. The Single-Sided Order Book Dominance model in TT Score analyzes and scores clusters that may indicate that a single trader is dominating the total traded volume for either the buy or sell side of an instrument during the session.
When a single trader's resting orders make up the majority of the disclosed volume for an instrument, they have control over the pricing of that instrument. The Single-Sided Order Book Dominance model can alert your firm to this behavior, which may be an indication of potential market manipulation.
Note: The Single-Sided Order Book Dominance model only identifies potentially suspicious trading behavior. This model does not necessarily reflect an actual rule violation.
For dominance models, TT Score computes a cluster score based on trading activity that may reflect a trader's attempt to control the pricing of an instrument.
Higher scores indicate the trading activity within a cluster matches the pattern of market domination. A company's risk monitors can use these scores to prioritize resources for investing which users' trading activity poses the most risk.
The Single-Sided Order Book dominance model finds instances where the trader has more than a certain percentage of the disclosed volume from the top 5 or 10 price levels of buy or sell orders for an instrument and receives at least one fill.
Each cluster is assigned a risk score on a sliding scale between 0-100. This score represents the probability that Single-Sided Order Book dominance occurred during the duration of the cluster's trading activity.
Based on TT Score best practices, clusters that score over 75 are deemed to be “high risk” and should be the primary focus of users during their compliance reviews.
The Scorecard Metrics section measures the following statistics related to session dominance:
Using the Cluster Scorecard, you can view the details of the activity that triggered the session dominance score.