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I am using ITCH protocol to get the Market Data information for Forex and trying to implement LOB on it and what i have noticed is that Bid and Ask prices are crossing very often. Should that be happening in the normal circumstances for Forex trading? or Raw data from the ITCH data stream has to be filtered first manually?

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Are you looking for FX aggregation services? – pyCthon Jun 28 at 1:57

Where are you sourcing your data from? In the equities markets you will see crossed/locked markets at the NBBO if consuming direct feeds from each venue. You typically will not see it at a specific venue, however there are circumstances where you will (for example, NYSE pre-open or during LRP, etc).

For FOREX I'd assume crossed/locked markets would be significantly more common since there is no central exchange or book, but rather a collection of books and market makers.

As an aside you reference "ITCH" so I presume you're taking data from some FOREX broker who's using ITCH to broadcast book changes. When referring to ITCH 99.99% of the people in the world assume you mean NASDAQ markets.

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Actually i am working on "Hotspot ECN ITCH Protocol v1.57" – Taimoor Choudhary May 10 '12 at 10:59
Where did the data come from? Did you collect it yourself or receive it from Knight? Are there gaps or out of order messages in the data? Data cleanliness could be an issue that you should investigate. I don't know how HotSpot works, whether it does automatic matching, etc, so you should contact them to see if the crosses are artifacts or real. – Louis Marascio May 10 '12 at 15:56
@LouisMarascio Hostspot FX is a single ECN. – pyCthon Jun 28 at 1:57

First, that's a common thing in active hours. Since you are dealing with fx, you should ask Hotspot representative what kind of liquidity are you getting. Usually, if you want to aggress on those crossing prices, you won't be able to. Imagine everybody trying to do arb on that. So, ask Hotspot what kind of liquidity they are sending you.

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