This is an update to
   • BATS Quote Update - who gets it first...  
It incorporates a hypothetical ISO order sent by the Mahwah HFT to the NYSE, which changes NYSE's quote before the SIP delivers it. This would allow the sending HFT to establish the top of the queue at the new price level on NYSE.

From our analysis of several billion quotes with microsecond time-stamps from both the SIP and Direct Feeds, we found the NYSE quote will often react to changes in BATS quote earlier than possible. For example, the NYSE will often aggressively lock the BATS quote as if the system had knowledge of a new BATS quote well before getting it from the SIP.

One possibility is that an HFT is sending a Day ISO order to NYSE which tells the NYSE "It's OK if this quote locks another market, because I'm also routing ISO orders to those markets to clear their quotes.

What we found in the data: if the HFT at Mahwah were to send a Day ISO order to NYSE when they received the BATS quote update, it was always very close to the time when the NYSE would change and lock the older BATS price still in the SIP (and about to be updated).

If this is the scenario, then the HFT is really using ISO orders to change NYSE's quote, and sneak its way to the top of the queue at the new price level. NYSE has no way of knowing if the ISO is legit or not, and won't get a SIP update until the very end of the animation.

Note - the Mahwah HFT already knows the BATS quote has changed. They aren't sending an ISO order to NYSE to sweep markets, they are simply using the ISO order to change NYSE's quote!