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Key Takeaways
- Level 2 displays quotes from market participants, venues or multiple price levels.
- Traditional Nasdaq Level 2 shows each participant’s best quote; TotalView supplies Nasdaq’s full displayed depth.
- Read quote prices and sizes together with completed trades.
- The worked five-level book contains 18,000 bid shares and 12,000 offered shares.
- That book has a 60% bid share and a +0.20 signed imbalance.
What is Level 2 market data?
Level 2 market data is a quote feed that shows displayed bids and offers from market participants, venues or multiple price levels, not just the best bid and offer. Each row combines a price with its displayed size, so traders can see where visible trading interest is concentrated on each side of the inside quote.
Traditional Nasdaq Level 2 provides each participant’s best-priced quote. Nasdaq TotalView provides Nasdaq’s full displayed depth. Market-by-price views aggregate size at each price; market-by-order views expose individual displayed orders.
How to read Level 2: price, size and the spread
The worked book’s best bid is $42.18 and best offer is $42.19, a one-cent spread. Five selected bid levels total 18,000 shares. Five selected offer levels total 12,000.
Compare the depth close to the inside quote with the quantity you intend to trade. Follow how the available rows change as orders execute, update or cancel.
Formula
Displayed book imbalance, bid-share scale = bid size in selected levels / (bid size + ask size in selected levels)- Bid share ranges from 0 to 1, with equal bid and ask depth at 0.50.
- Signed imbalance equals (bid size − ask size) ÷ total size, with equal depth at zero.
- The conversion is signed imbalance = 2 × bid share − 1.
Worked Example
A depth screen shows 18,000 displayed shares across the top five bid levels and 12,000 across the top five offer levels.
- Selected bid depth: 18,000 shares
- Selected ask depth: 12,000 shares
- Selected total depth: 30,000 shares
- Bid share: 18,000 ÷ 30,000 = 60%
- Signed imbalance: (18,000 − 12,000) ÷ 30,000 = +0.20
The five selected levels contain 6,000 more bid shares than offered shares. They produce a 60% bid share and a +0.20 signed imbalance. Compare the displayed depth with executions and replenishment around the inside quote.
How is Level 2 book imbalance calculated?
Bid share divides bid size by total size: 18,000 ÷ 30,000 = 0.60, or 60%. Equal bid and ask depth produces 50%.
Signed imbalance divides the size difference by total size: (18,000 − 12,000) ÷ 30,000 = +0.20. Equal depth produces zero. The conversion is signed imbalance = 2 × bid share − 1.
Both calculations describe the same selected book. Use the named scale to compare readings directly.
How traders use Level 2 with time and sales
Read time and sales alongside the ladder. Track the shares that execute, the size that replenishes and the price movement that follows. An MPID identifies the quoting participant; execution records supply the completed trade quantities and prices.
For options, examine the selected strike and expiration. A complex-order book handles package prices and quantities, while a single-leg book displays the individual contract. Options flow shows the prints that executed in that contract, with size and the side they filled on, and the options profit calculator shows how each price and quantity on the book changes the position’s payoff.
Limitations of Level 2 market data
- Level 2 shows only displayed orders. Hidden size, non-displayed orders and off-exchange liquidity stay off the screen, so check the prints in time and sales before you size off the book.
- Displayed quotes are firm while they rest, but they execute, update or cancel before your order arrives. Use a limit price, so a level that disappears never fills you deeper in the book.
- Know which slice of the market your product covers. Traditional Nasdaq Level 2 shows each participant’s best quote, and a single venue’s depth feed shows only that venue’s book.
- Name the depth with the reading. The example’s +0.20 covers five levels, a ten-level read of the same book gives its own number, and both need confirming against completed trades.
Bottom line
Level 2 market data shows the displayed bids and offers at several price levels, with the size at each one. Use it to compare visible depth with your order size, state which imbalance scale you read, and confirm what the book shows against completed trades in time and sales.
Clear answers
Frequently Asked Questions
Sources and Further Reading
How entries are sourced, calculated and updated: editorial methodology.