Introduction to Level II (level 2, L2, L II, Lii) - Page 7

Ok, that`s interesting. So this means that i will never be able too see the exact amount of shares on the bid/ask in L2?
This brings me to my next question, let`s say i wanna buy a share at 10 cents and when i look at the L2 window i see there are 3 different blocks on the asks at 10 cents with 5000 on each, does this mean that there is a total of 15000 shares offered at 10 cents or am i wrong here?

Thanks for your answer

It means 3 MMs (representing who knows how many orders) are showing somewhere around 15000 shares offered at 10 cents, at this moment.

Or to illustrate another way, think of it more as checking the eyes/body language of other poker players at the table, as opposed to checking an accounting ledger.

I found this great video about level 2

http://www.youtube.com/watch?v=FKgAv...eature=related

Enjoy
Info

That was good info,,,Info

Thank you Houndog

Bump, thanks for posting Info, highly recommended.

Thank you
I think it help people understand l2 little more

Haven't watched the vid but will.

This is some TSX document for issuers.

http://www.tmx.com/en/pdf/MarketMakerPresentation.pdf

Market rules require that 70-80% of the total trades of a
Market Maker be against the market. This means buying when
there are sellers and selling when there are buyers
The market decides what the stock is worth and not the
market-maker
• However during the course of a trading day, if there is
buying pressure on a security and the trend is up, the
Market Maker will contribute to absorbing some of those buy
orders so the stock does not gap too much from trade to
trade
• Most of the trading for a Market Maker is passive in the
sense that when there are buy orders, they are absorbing
some of the buying pressure as sellers and vice versa
This participation helps to mitigate excessive price swings

So that means if the MM's have way more bids there are really 70% more buyers at the ask?

and huh?
How Minimum Guaranteed Fill works
Each security has an MGF volume, for example:
– MGF=1599
– Current Quote: 1000 $4.95 - $5.00 500
(1000 shares bid at $4.95 & 500 offered at $5.00)
– Client order to buy 1500 shares at market price
– Total purchase: 500 shares from posted offering and
1000 shares from Market Maker
– TSX trading engine will generate an automatic fill for the
Market Maker for 1000 shares at $5.00
– The system will show to the Market Maker that it is an
automatic MGF fill

Yes, thanks for the vid, info-

also
He seemed to be saying 1 = 100
so 5000 = 500,000 shares offered.

English stuff
http://www.investorschronicle.co.uk/...akers--DMA.jsp

Brokers and institutions with larger orders than those bid and offered on screen will leave an order with a market maker. Market makers and brokers spend a great deal of time building relationships and market etiquette prevents them from doing the rounds of market makers and splitting the order up into smaller chunks. Often, you will see prices move without a corresponding print on the time and sales screen, as the market maker will be working a larger order for an institution or broker, which will not be printed until the end of the day. Such transactions are marked with a 'T' to represent a protected trade. Figure 2, above, shows 250,000 shares booked out from protection at 390. Look for protected trades at the end of the day as they often signify an institutional order that could create a bias in a stock’s direction. A comprehensive list of trade codes is also available on- url doesn't work

Figure 3

Momentum traders often specialise in trading market-maker challenges. Market makers will often deal among themselves, especially when one appears to be holding a stock up or down against the other market makers' interest. If a market maker is artificially holding a stock up or down and is challenged by another market maker, there is often a short-term momentum play that can dramatically push a price in one direction or the other. When a market maker runs around the market challenging, the trade is reported with an 'M' next to it. It is, however, a trick of the market makers to print 'M' trades in order to attract momentum players' interest to fill their larger institutional orders. An 'M' trade can be seen in Figure 3 above.
SETS
Level 2 provides the trader with an informed image of the supply and demand situation in the market, but must be used in conjunction with other supply and demand factors. When watching Level 2, remember that a market maker has taken the other side of your order and so it is important to watch market-maker behaviour when determining market sentiment. But this is not the case with order-driven systems like SETS, which has proved unpopular with market makers, who are used to having more control over prices. The London Stock Exchange (LSE) has converted more and more stocks to SETSmm.

Same page

Although Level 2 has brought much greater insight to the independent trader, there are still tricks available to larger institutions and traders who wish to cover their tracks. For example, the delayed printing of orders often causes larger institutional orders to drive a market before the explaining order is printed for all to see.
Level 2 on SETS is great for better execution but, owing to the nature of the system, traders who are new to Level 2 can waste a lot of time speculating on 'fake' orders. You will frequently see large orders on the book that disappear as soon as they approach the touch price. One common scenario is an institution with a large sell order putting a large order on the bid side of Level 2 slightly lower than the touch price. The inexperienced trader will interpret this as a support level. The institution has spoofed the market into buying the stock he wishes to sell and, if the bid side approaches his large order, it will cancel automatically. This type of behaviour is very common indeed.
On Level 2, you can often spot larger trades by looking out for an iceberg order. Iceberg orders are used to disguise larger orders by an automatic reloading facility. For example, an institution may have an order to sell 1m shares and can leave an iceberg order on the book to sell 10 tranches of 100,000 shares, which will automatically reload every time the offer is lifted until the 1m shares are sold. This reveals the order’s true size and thus prevents panic sellers from causing the price to fall away.

We see this all the time,,,,,again good info

I really enjoyed the video . Very helpful .The guy did A+ job .
I'm glad you all enjoyed it .
Thank you

This is a little dated- just thought MADF was funny (or not so funny)

http://www.tigernt.com/onlineDoc/MMID.html


Market Maker Identification Codes

AANAABN Amro, Inc.MASHMayer & Schweitzer, Inc.
ADAMAdams, Harkness & Hill, Inc.MDLDMcDonald & Co. Securities, Inc.
AGISAegis Securities, Inc.MLCOMerrill Lynch, Inc.
AXCSAccess Securities, Inc.MONTBank of America Securities, LLC.
BARDRobert Baird & Co., Inc.MSCOMorgan Stanley & Co., Inc.
BESTBear, Stearns & Co., Inc.NEEDNeedham & Co., Inc.
BRADJC Bradford & Co., Inc.NFSCVNational Financial Services Corp.
CANTCantor Fitzgerald & Co., Inc.NITEKnight Securities, Inc.
CHIPBlue Chip Trading, LLC.OLDEOlde Discount Corp.
CIBCCIBC World Markets Corp.PERTPershing Trading Co., LP.
COSTCoastal Securities, LTD.PIPRPiper Jaffray, Inc.
COWNSG Cowen Securities, Inc.PRUSPrudential Securities, Inc.
CWCOCrowell, Weedon & Co., Inc.PUREPure Trading, Inc.
DBKSDeutsche Bank Securities, Inc.PWJCPaine Webber, Inc.
DEANDean Witter Reynolds, Inc.RAGNRagen MacKenzie Inc.
DKNYDalton Kent Securities Group, Inc.RAJARaymond James & Assoc., Inc.
DLJPDonaldson, Lufkin & Jenrette, Inc.RAMSRamius Securities, LLC.
FBCOCredit Suisse First BostonRBCDRBC Dominion Securities, LLC.
FCAPFirst Union Capital Markets Corp.RSSFBancBoston Robertson Stephens, Inc.
FLTTFleet Securities Corp.SBSHSalomon Smith Barney, Inc.
GFINGranite Financial Group, Inc.SELZING Baring Furman Selz, LLC.
GSCOGoldman, Sachs & Co.SHWDSherwood Securities Corp.
HMQTHambrecht & Quist, LLC.SLKCSpear Leeds & Kellogg Capital Markets
HRZGHerzog, Heine, Geduld, Inc.SNDSSands Brothers, Inc.
ITGIITG, Inc.SNDVSoundview Technology Group, Inc.
JBOCJB Oxfrod & Company, Inc.SWCOSchroder Werthheim & Company, Inc.
JEFFJeffries & Company, Inc.SWSTSouthwest Securities, Inc
JOSEJosephthal Securities, Inc.TUCKTucker Anthony, Inc.
JPMSJP Morgan Securities, Inc.TWPTThomas Weisel Partners, LLC.
KCMOSecurity Investment Company of KCWARRWarburg Dillon Read, Inc.
LEGGLegg Mason Wood Walker, Inc.WEDBWedbush Morgan Securities, Inc.
LEHMLehman Brothers, Inc.WEEDWeeden & Company, LP.
MADFBernard L. Madoff, Inc.WPCOWasserstein Perella & Company, Inc.
Electronic Communication Networks (ECN's)

ARCAArchipelago ECN
ATTNAttain ECN
BRUTBrass Utility ECN
BTRDBloomberg Trade Book ECN
INCAInstinet ECN
ISLDIsland ECN
MWSEChicago Stock Exchange
NTRDNextrade ECN
REDISpear Leeds & Kellogg ECN
STRKStrike Technologies ECN
MKXTMarket XT ECN

So this is why why we see the $100.05 asks on .0001 stocks?

To qualify as a market maker, a brokerage firm is required to buy or sell shares regardless of whether or not it has customer orders. If there are no customer orders, the shares become part of the market maker's stock inventory. NASDAQ and OTC stocks rely exclusively on the market maker system to create an orderly trading market for their shares. Most NASDAQ companies have more than one market maker. The market maker reduces risk associated with price fluctations by maintaining a bid-ask spread on each stock it covers. The difference between the ask and bid price is profit the market maker pockets as compensation for risk.

hi

This seems useful

The "Time & Sales" column displays the "Trade Indicator" code on the left side of the column. A normal trade will have no Trade Indicators.

Here are the original code descriptions:

CodeCode Description
aacquisition
bbunched trade - average price
ccash trade
ddistribution
eautomatic execution
gbunched sold trade - opening/reopening trade detail
hintraday trade detail
ibasket index on close transaction
jrule 127 trade
krule 155 trade
lsold last
nnext day
oopened
pprior reference price
rseller
ssplit trade
tform t trade - pre/post market trade
waverage price trade
yyellow flagged regular trade
zsold - out of sequence

I read through a lot of this thread, as I'm trying to learn Level II better, and start using it as a tool.

I check out a lot of books on various areas of stock trading at the library, and end up buying a few of them for reference. I came across this book in the library the other day, and haven't been able to put it down.

I recommend that anyone seriously interested in bettering their understanding of Level II and using it, to get this book. "How to Get Started in Electronic Day Trading" by: David Nassar.

It's not only for day trading, but for swing trading also.

After finishing this book, I'm looking for something written more recent. 2005 or later. I would rather have that for a reference.

The book I mentioned above is excellent, but written in 1999. They were still using the fractional system, talking about Windows 98, and dial up modems vs. satellite connections.

Can anyone recommend a book that covers all the aspects of Level II? Especially concentrating on OTC / Nasdaq.

I'm trying to understand how this can happen. Here's what I'm seeing right now on ACTC:

Yesterday's close was at .102. Today's open was at .115. Huge news came out prior to market open for ACTC.

The average daily volume is at 4.92 million. In the first hour, it's surpassed 13 million. The OBV is showing accumulation.

Now, what I really can't figure out is, this hit .12 almost right away, and then has been trading between .105 and .113 all this time. (First hour)

How can the PPS stay so low, when the volume is climbing so quickly? Time and Sales window shows huge buys coming through. (Huge sells also). But more buys than sells.

Thanks.