Level 2 and Level 3 market data is information about bids, asks and orders in an electronic order book. Level 2 data shows aggregated market depth beyond the best available quote. Level 3 data usually shows the individual orders behind those price levels, including order size and queue position.
The terms Level 2 and Level 3 do not have one universal industry definition. Exchanges and brokers can use different names and provide different amounts of market depth. Nasdaq, for example, refers to its deeper order-book products as Level 2 and TotalView. CME Group uses Market by Price and Market by Order.
Level 2 vs Level 3 Data at a Glance
| Feature | Level 2 Data | Level 3 Data |
|---|---|---|
| Main view | Aggregated market depth | Individual orders in the order book |
| Shows the best bid and ask | Yes | Yes |
| Shows multiple price levels | Usually | Yes |
| Shows total volume at each price | Usually | Yes |
| Shows individual order sizes | Usually no | Yes |
| Shows individual order IDs | No | Often, depending on the exchange |
| Shows queue position | Limited or no | Often |
| Shows market participant or venue | Sometimes | Depends on the feed |
| Typical users | Active traders and discretionary intraday traders | Algorithmic traders, market makers and institutional traders |
| Common technical equivalent | Market by Price, or MBP | Market by Order, or MBO |
What Is Level 2 Data?
Level 2 market data shows multiple bid and ask prices, the quantity available at each price, and sometimes the market participant or exchange providing the quote.
A Level 2 order book might look like this:
| Bid Price | Bid Size | Ask Price | Ask Size |
|---|---|---|---|
| $99.99 | 500 | $100.01 | 300 |
| $99.98 | 1,200 | $100.02 | 800 |
| $99.97 | 2,000 | $100.03 | 1,500 |
This gives a trader more information than Level 1 data, which normally shows only the best bid, best ask and last traded price.
What Level 2 Can Show
Depending on the provider, Level 2 data can include:
- Several price levels above and below the current market
- Total displayed shares or contracts at each price
- The number of orders at each price
- Market maker or participant identifiers
- Bid-ask spread information
- Changes in displayed liquidity
- The possible price impact of a market order
Nasdaq's Level 2 feed, for example, provides the best bid and ask position for each Nasdaq market participant rather than every order at every price. Nasdaq identifies TotalView as the deeper service, showing all displayed orders and aggregate size at each price level.
What Level 2 Does Not Necessarily Show
Level 2 data may not show:
- Every order at every price
- Hidden or reserve orders
- Orders on every exchange
- Odd-lot orders
- The exact priority of orders within a price level
- The identity of the ultimate buyer or seller
For U.S. stocks, a Level 2 screen may represent one exchange, one market-data feed or a broker's aggregated view. It should not automatically be treated as a complete view of the U.S. equity market.
What Is Level 3 Data?
Level 3 market data provides order-by-order information instead of showing only the combined quantity at each price.
For example, Level 2 might show:
| Bid Price | Total Bid Size |
|---|---|
| $99.99 | 1,000 shares |
Level 3 may show that the 1,000 shares consist of:
| Order | Price | Size | Queue Position |
|---|---|---|---|
| Order A | $99.99 | 400 | 1 |
| Order B | $99.99 | 300 | 2 |
| Order C | $99.99 | 300 | 3 |
This provides more detail about how the order book is built and how orders may be executed.
CME Group calls this type of feed Market by Order, or MBO. CME describes MBO data as providing individual order sizes, full depth of book and queue-position information. Its Market by Price, or MBP, data consolidates orders into total quantities at each price level.
What Is the Main Difference Between Level 2 and Level 3?
Level 2 answers: How much buying and selling interest is displayed at each price?
Level 3 answers: Which individual orders make up that interest, and where do those orders sit in the execution queue?
Level 2 is mainly price-level data. Level 3 is mainly order-level data.
Two price levels with the same total volume may behave differently. A single 10,000-share order can disappear at once, while 100 separate 100-share orders may be canceled or executed one at a time.
How Do Traders Use Level 2 Data?
Level 2 data helps traders assess short-term liquidity and execution conditions.
Common uses include:
Evaluating the bid-ask spread A narrow spread generally indicates tighter displayed liquidity than a wide spread.
Estimating market impact A trader can check the volume available at nearby prices before submitting a larger market order.
Identifying visible support and resistance Large displayed bids or offers may indicate areas of visible interest, although those orders can be canceled.
Monitoring liquidity changes Rapid additions and cancellations can show changes in short-term market activity.
Choosing order types Market depth can help a trader decide whether to use a market order, limit order or smaller staged orders.
Level 2 data does not guarantee that a displayed order will remain available. Treat it as a changing snapshot of displayed interest, not a promise that a trade can be executed at a specific price.
How Do Traders Use Level 3 Data?
Level 3 data is most useful when execution priority and order-book behavior matter.
Typical users include:
- Market makers
- High-frequency trading firms
- Proprietary trading firms
- Algorithmic execution teams
- Quantitative researchers
- Traders studying order-book microstructure
Level 3 data can help with:
- Estimating queue position
- Modeling order-execution probability
- Tracking individual order additions and cancellations
- Reconstructing the order book
- Measuring order-flow behavior
- Improving execution algorithms
- Studying liquidity at very short time intervals
For a typical investor who places occasional stock trades, Level 3 data is usually unnecessary. The extra detail matters most when a strategy depends on execution speed, queue priority or order-by-order analysis.
Is Level 3 Better Than Level 2?
Level 3 is more detailed, but it is not automatically better for every trader.
Level 3 is more suitable when you need:
- Full order-book reconstruction
- Individual order tracking
- Queue-position analysis
- Algorithmic execution
- High-frequency or market-making research
Level 2 is usually enough when you need:
- A clearer view of nearby liquidity
- Multiple bid and ask levels
- Intraday order-entry context
- Basic depth-of-market analysis
- A practical trading interface
Level 3 feeds also create more technical requirements. They generate more messages, require more processing and can be expensive to license. A trader without a strategy for interpreting order-level updates may gain little from the additional information.
Does Level 2 Show the Entire Market?
No. Level 2 data does not necessarily show every exchange, every order or every form of liquidity.
Coverage depends on:
- The exchange supplying the feed
- Whether the data is direct or consolidated
- The security or futures contract
- The number of price levels included
- Whether odd lots are included
- Whether hidden and reserve orders are reported
- The broker's market-data agreement
For example, Nasdaq describes its Level 2 product as showing the best-priced order or quote from each Nasdaq member. Nasdaq TotalView provides deeper information about displayed orders in the Nasdaq order book.
Level 2 and Level 3 Data in Stocks, Futures and Forex
The terminology changes by asset class.
Stocks
Stock-market platforms commonly use Level 2 to describe market depth. Level 3 may refer to a deeper order-by-order feed, but many U.S. equity exchanges use product names such as TotalView, OpenBook or order-by-order feeds instead.
Futures
Futures exchanges often use the terms Market by Price and Market by Order.
- Market by Price aggregates volume at each price.
- Market by Order identifies individual orders and can provide queue information.
CME Group uses this MBP and MBO distinction rather than relying mainly on the terms Level 2 and Level 3.
Forex
Spot forex is traded through a network of banks, brokers and liquidity providers rather than one central exchange. A forex platform's Level 2 display may show only the liquidity available from that broker or its connected providers. It may not represent the complete global forex market.
Limitations and Risks of Level 2 and Level 3 Data
Level 2 and Level 3 data show displayed market interest. They do not reveal every trading intention.
Important limitations include:
- Orders can be canceled before execution.
- Hidden liquidity may not appear.
- Large displayed orders can be split or repositioned.
- Data from one venue may not represent the whole market.
- Feed latency can make the displayed book temporarily outdated.
- Different vendors may aggregate and label data differently.
- A large order does not guarantee support or resistance.
- Market orders can consume several price levels during fast markets.
The SEC has noted that the method used to report order-book data affects how market activity is interpreted. Order-based and price-level reporting can produce different trade and order metrics from the same underlying activity.
Which Data Should You Choose?
The right choice depends on the type of trading decision you need to make.
| Your Objective | Most Suitable Data |
|---|---|
| Long-term investing | Level 1 |
| Checking the current spread | Level 1 |
| Active intraday trading | Level 2 |
| Estimating short-term liquidity | Level 2 |
| Market making | Level 3 or MBO |
| Queue-position analysis | Level 3 or MBO |
| High-frequency trading | Level 3 or MBO |
| Backtesting order-book strategies | Full-depth order-level data |
| Trading forex through a retail broker | The broker's own market-depth feed, with coverage carefully checked |
Bottom Line
Choose Level 2 if you need a practical view of nearby bids, asks and displayed liquidity. Choose Level 3 or MBO if your work depends on individual orders, queue position, order-book reconstruction or execution modeling.
Before paying for a feed, check the exchange or broker's specification. Level 2 and Level 3 are commonly used labels, but they do not have one universal definition.