Single-Sided Order Book Dominance

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 Trade Surveillance 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.

Scoring methodology

For dominance models, TT Trade Surveillance 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.

Single-Sided Order Book Dominance score interpretation

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 Trade Surveillance 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.

Single-Sided Order Book Dominance scorecard metrics

The Scorecard Metrics section measures the following statistics related to session dominance:

• Buy Mkt Dominance T5 — The top 5 price levels of buy volume for an instrument during the session.
• Sell Mkt Dominance T5 — The top 5 price levels of sell volume for an instrument during the session.
• Buy Max Discl Qty T5 — The top 5 price levels of maximum disclosed buy quantity for an instrument during the session.
• Sell Max Discl Qty T5 — The top 5 price levels of maximum disclosed sell quantity for an instrument during the session.
• Buy Avg Qty T5 — The top 5 price levels of average buy quantity for an instrument during the session.
• Sell Avg Qty — The top 5 price levels of average sell quantity for an instrument during the session.
• Buy Mkt Dominance T10 — The top 10 price levels of buy volume for an instrument during the session.
• Sell Mkt Dominance T10 — The top 10 price levels of sell volume for an instrument during the session.
• Buy Max Discl Qty T10 — The top 10 price levels of maximum disclosed buy quantity for an instrument during the session.
• Sell Max Discl Qty T10 — The top 10 price levels of maximum disclosed sell quantity for an instrument during the session.
• Buy Avg Qty T10 — The top 10 price levels of average buy quantity for an instrument during the session
• Sell Avg Qty T10 — The top 10 price levels of average buy quantity for an instrument during the session

Identifying Single-Sided Order Book Dominance

Using the Cluster Scorecard, you can view the details of the activity that triggered the session dominance score.

For example:

1. The Sell Avg Top Qty shows that the average total sell quantity of the top five price levels was just over "2.8". The average quantity is represented by the lightly shaded portion of the bar graph.
2. The Sell Max dominance metric shows a traded volume of "19", which dominated the Sell side volume for the instrument. The dark shaded portion of the graph represents Sell Market Dominance.