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Odd Lots

Now that odd-lot trading is being reported "on the tape" by the Securities Information Processors (SIPs), it appears that some people with low commissions are actively testing out proprietary strategies using odd-lots. The advantage of odd-lot testing over simulator or paper trading is that "impact" is accounted for with minimal capital requirements. Of course, if commissions make it prohibitive for you to test this way, then, as they say in Brooklyn: fuggedaboudit.

2 responses

Hello Abraham,

The paper "What’s Not There: The Odd-Lot Bias in TAQ Data" (see: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1892972) discusses odd-lot trades including in the context of HFT.

P.

Thank you Peter. The takeaway is that we no longer need to guess or use proxies as odd-lots are now reported. Perhaps Professor O'Hara's paper had real regulatory impact. Kudos to her and to her graduate students.