Level II usefulness

Discussion in 'Order Execution' started by smoss, Feb 3, 2004.

  1. smoss


    Is there really any usefulness in watching NASDAQ Level II screens these days? I am new to trading, and it seems that most of the prints, including big block transactions, happen on ECN's or alternate exchanges, with very little of the true volume actually being shown on the Level II screen, and, the MM's never actually show their true size, and as I understand it, trade themselves using ECN's to hide intentions. With all the games, is there any way to decipher short term momentum?
  2. and your absolutely right, what is even more disturbing is the amount of front running in my opinion that is going on. Not only are many MMs getting away with it, but a fashionable thing to do these days is to have a cronie on the outside getting a heads up that somthing is for sale or bid. I heard about a guy who has a office in NYC in same building as his buddy who works at a big house and needless to say the cronie makes HUGE dough day trading

    Anyone can say what they want about exchanges, I know first hand they watch for front running which is running rampant in OTC these days.
  3. ChrisRT


    Level 2 usefulness has dwindled with the advent of SuperSOES and Decimalization a couple years ago. For me, it's nothing more than a risk analysis tool, seeing what kind of liquidity is available and how tight spreads are outside the current bid/ask.

    There are times you can decipher who is doing what at what price, but it takes up so much time and mental resources for what can amount to a 5-10 cent move that I found it "wasting" my mental resources. In the late 90s, it was easier to figure out. Now, it's nothing more than a risk evaluation tool.

  4. Bob111


    i rise same question couple month ago,when i was read about HIDDEN type of order, but got no answer at all. if everyone can hide his size-it make L2 useless
  5. It's a lot less useful now than it was 2 years ago, that's for sure. I think that the main reason is reserve size. Although it existed back then too, market makers have become very adept at using it to their advantage with huge size, especially in periods of low volatility. If you ask me, reserve size is a huge advantage to market makers and is completely unfair. If someone wants to bid 100000 shares, they should have to display 100000 shares, not 100 with 99000 magically hidden shares behind it. It makes Level 2 a complete joke at times and can be very difficult to read. The SEC should step in and do something about this.
  6. Hmmm. Sometimes I want to buy 3000 or 4000 shares But I don't aways put them out in one bundle for all to see - nor do I leave them at one price. I move them about. And that is with this piddling amount.

    If I was looking to buy/sell the quantities you are talking about I would be irked if the SEC told me I had to place it all once so that every buyer in the market knew exactly what I wanted.

  7. yes, everyone can hide size. however, level 2 is not totally useless.
  8. smoss


    So basically, Level II is now just a very rough gauge of market liquidity?
  9. c_verm


    Level II is very important to me. I Guess if your not daytrading you dont need it but if you are its prity important to get the depth of each price level & most importanly to spot MM TRAPS!!
  10. Turok


    >The SEC should step in and do something about this.

    The SEC is not going to do anything about this type of behavior and they shouldn't. You nor I nor any other trader is obligated to let the others know how many shares they want or don't want.

    Stores say "limited quantity" in advertisements all the time to generate interest when "limited" means whatever they want it to mean. Does the FTC bother with this?

    #10     Feb 4, 2004