What is Level 2 data?

[roycheuk]

Hi,

Can anyone tell me what is the level 2 data (aka order book)? How's useful is it? and what spreadbetting companies provide level 2 data with their platforms?

 

[jefftheripper]

This is a little late since you posted. I had the same question. Here's what I found and figured I post it for others with the same question.

Level 2
Additional market data is known as level 2 market data, the order book, or the depth of market, and includes the following additional information:


•Highest bid prices: The highest 5 or 10 prices (depending upon the market) that traders are willing to pay to buy a contract
•Bid sizes: The number of contracts that are available at each of the highest bid prices
•Lowest ask prices: The lowest 5 or 10 prices (depending upon the market) that traders are willing to accept to sell a contract
•Ask sizes: The number of contracts that are available at each of the lowest ask prices

Level 2 market data provides the additional information that is needed to trade using trading systems that follow the order flow, such as scalping trading systems, and advanced volume based trading systems. Level 2 market data is also known as the order book, because it shows the orders that are currently pending for the market, and is also known as the depth of market, because it shows the number of contracts that are available at each of the available prices.

 

[dcraig1]

Here is a snapshot of the Korean stock index futures order book: