About Level II Stock Quotes

Level II stock quotes are a form of stock information that showcases an overview of the activity on a particular stock in real time. It shows all the data from public market makers, including those who are buying and selling the stock, as well as the range of prices the stock has been traded at throughout the day.

Significance

A level II stock quote is typically comprised of three pieces of information: the market maker, the price point, and the volume amount.
The market maker is the investor who is buying or selling the stock. Market makers are usually labeled through a three- or four- character identifier that is consistent for all their trading.
The price point is the price per share being bid. It is usually rounded to four digit places.
The volume amount indicates how many shares of the stock the market maker is buying or selling at one time.

Function

For investors, level II stock data is essential information because it provides an detailed overview of the stock's trends for the day of trading. It is also referred to as the "order book." The level II order book traditionally represents the regional market information, and contributes the top ask and bid price points to the stock's Level I data. Level I data provides traders with an at-a-glance snapshot of the stock information, including real time pricing skimmed from the Level II data as well as information on the stock's performance the previous trading day and general information about the market and exchange.

Warning

Level II is refreshed by the markets after every trading day, and therefore only shows the current trading day's information. Trading problems and misinformation can occur when this data is not refreshed properly by the data management firms that provide the various stock information outlets. Stale data, or stuck data, can cause the overall trending of the stock to be misunderstood or misread, leading to expensive trading errors.

Identification

Market maker identifiers do not indicate whether the order has been placed by a day trader, computer, or wholesale firm. Day traders are the individuals who personally enter information into the markets on the behalf of their clients and are best exemplified by the traders seen on the floor of the New York Stock Exchange. There are also ECNs, Electronic Communication Networks, which place orders for clients via computer systems. ECN clients can range from individuals trading online at home or large institutions. Wholesalers, also called "order flow firms," also place orders that appear in the level II order book and are traders who are commissioned by other traders to work on their behalf.

Potential

Depending on the market, the market maker identifier may or may not be visible to the public. The London Stock Exchange, Hong Kong Exchange, Tokyo Exchange and several other European exchanges do not show market maker identifiers and typically leave that column of information blank or demarcated with generic four digit number.