Lee–Ready 1991

Lee & Ready 1991, Journal of Finance§II — Inferring trade direction

Aggressor-side classifier built on a quote rule (compare against pre-trade NBBO mid) with a tick-rule fallback (compare against the most recent different print). The pre-trade NBBO requirement is the load-bearing replay-stability constraint; the crate's cycle tracker maintains exactly the QuoteLabel::PreTrade convention.

Reference →

Authoritative reference

Lee, C. M. C. & Ready, M. J. (1991). Inferring Trade Direction from Intraday Data. Journal of Finance 46(2), 733–746.

DOI: https://doi.org/10.1111/j.1540-6261.1991.tb02683.x.

JSTOR: https://www.jstor.org/stable/2328845.

Consumed by

• OptionFlow — Lee–Ready aggressor classification.
• StockFlow — same.
• OptionTrades — default side classifier.
• PerContractMoneynessSlice — same.

Algorithm

1. Quote rule. Compare the trade price to the prevailing NBBO midpoint computed from the most recent pre-trade quote.
   • Above midpoint → buy.
   • Below midpoint → sell.
   • At midpoint → fall through to the tick rule.
2. Tick rule. Compare the trade price to the most recent different trade price.
   • Higher → buy (upward tick).
   • Lower → sell (downward tick).
   • Equal → carry the prior tick verdict (zero tick).

The quote rule's pre-trade-NBBO requirement is the load-bearing constraint: it is the contract that makes the classifier replay-stable. Lee & Ready 1991 §II.B documents the QuoteLabel::PreTrade convention; the crate's cycle tracker maintains exactly this label.

Tick-rule literal equality

Tick-rule comparisons use literal price equality against the previous print. OPRA / UTP wire prices are penny-quantised; tolerance-based comparisons would break replay parity on round-tripped streams.

Spec selector

The classifier is selected per spec via the SideClassification enum:

Variant	Behaviour
LeeReady	Lee–Ready §II.B against the pre-trade NBBO with a tick-rule fallback for at-mid prints. Default.
QuoteTouch	Strict quote-touch — price ≥ ask ⇒ buy, price ≤ bid ⇒ sell. At-mid prints route to the mid bucket; never resolved by tick-rule. Useful for replay validations against vendor-side classifications.