I used to trade SNPS (Naz 250 I think) through d4f MM5 and though I don't have Level 2 I did have the MyTrack order book running alongside the usual Sierra charts to get a rough idea of levels and depth.
What seemed to happen is the d4f quote will always take genuine prices from the order book, but not necessarily the best prices, i.e the ones at the top!
Mental stops were the only way to avoid being stopped out as the spread would vary from true market spread to 50 points or more, depending on how far down the order book d4f decided to pitch their quote. I think Henry is right that this happens more in thin conditions when d4f may feel nervous a sudden move is on the cards and it might go against them.
As long as I didn't let it freak me out when, say, I was long and the d4f bid suddenly fell several levels down the order book for no good reason (without any real trades happening at this level of course) I found that the artificial volatility did not affect me much as i could see from the order book and Sierra that this was not happening in the 'real world'.
I now no longer trade SNPS as after a week or two of near perfect daytrades I was arrogant enough to think I had it's measure - so of course one day it refused to be obedient, turned round and brutally savaged me with a terrifying flurry of teeth and claws.
Well actually like a prize twit I averaged down. Aaaaargh. Never again!
