Censoring

A price feed is a sample of a market, not the market itself. Censoring is what happens when that sample is thinned at exactly the moments it matters — updates dropped, coalesced, or rate-limited during the seconds in which the underlying market is moving fastest.

The effect on the display is specific and counter-intuitive: the chart gets calmer as the market gets wilder. Fewer updates mean fewer visible spread excursions, fewer visible gaps, and a bid-ask that appears to hold its usual range through an event it did not actually hold through. What the trader sees is a stable, executable-looking quote. What arrives is a rejection, a requote, or a fill at a price the display never showed — the quote staleness that censoring manufactures.

Not every thinned feed is deliberate. Bandwidth limits, aggregation windows, conflation in the distribution layer and plain infrastructure saturation all drop updates, and they drop them hardest under the same conditions. That is the point: intent is not observable from the tape, and it does not need to be. What matters to a trader — and what is testable — is whether the feed being quoted preserves the event structure of the market being traded.

Which makes this a measurement problem rather than an accusation. Update rate per second through an event window against the same window on a reference feed, inter-tick interval distributions, the ratio of quote updates to trades, and whether gaps in one feed line up in time with spread excursions in another: all of it is recoverable from captured ticks, and all of it separates a feed that thinned from a market that quietened.

The consequence for research is the one most often missed. A backtest run on a censored history understates spread widening and understates the depth withdrawal underneath it, because the widening was real but the record of it was never kept. The simulation then fills orders at prices that the feed itself had already stopped being able to offer.