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.

Note: The “resting period” (delay period) for Cross Trades is 5 seconds.

Scoring methodology

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

Score interpretation

TT Trade Surveillance assigns the following risk scores for cross trades:

• 100 — Delay is insufficient (less than 5 seconds) and Transaction ID (“TID”)/TradeMatchID match (if either field is reliable - this is exchange dependent), or no reliable TID/TradeMatchID  and fills occur within 300 microseconds.
• 95 — No reliable TID/TradeMatchID, but meets all other matching criteria, same trader, delay insufficient, fills more than 300 microseconds apart. 
• 75 — Delay is sufficient and TID/tradeMatchID match or fills occur within 300 microseconds
• 70 — No usable TID/TradeMatchID, but meets all other matching criteria, same trader, delay sufficient
• 70 — TID/TradeMatchID don’t match, but meets all other matching criteria, different trader, delay insufficient
• 62 — No usable TID, but meets all other matching criteria, different traders, delay sufficient
• 0 — Not a match on TID/tradeMatchID or it is a block 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. The following image shows results from inspecting a cross trading cluster.

When reviewing Audit Activity for cross trading, check if:

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