I'm writing a backtester and using an order-by-order Nasdaq ITCH feed whilst testing it.
Let's say the bid-ask spread is 100 @ 9-11 @ 100
My strategy inserts an bid order for 100 @ 10 and this becomes the new best bid. I continue parsing the ITCH feed and I see that the 100 @ 9 has traded. This implies had I really placed a bid for 10, that would have traded now.
So instead of removing the bid at 9, I remove my own order and notify my strategy that we were just filled. However, in reality the bid at 9 disappeared and therefore ITCH would never send another message (i.e. cancel) for it because as far as they're concerned, it no longer exists. Therefore I am stuck with this order in the book, which actually shouldn't be there.
Is this situation unavoidable in a backtesting simulation? Or is there something I can/should do?
