Level 2 market data is real-time information about the orders waiting to buy and sell a security. As of ****, a Level 2 feed may show at least 2 price levels on each side of the market, along with available order sizes and, depending on the provider, the exchange, market maker or participant linked to each quote.
Traders use Level 2 data to evaluate liquidity, bid-ask spreads, order-book pressure and the possible market impact of an order. It is most useful for active intraday traders, scalpers and traders handling larger orders. Long-term investors generally need only Level 1 quotes.
Level 2 Market Data at a Glance
| Feature | Level 1 Market Data | Level 2 Market Data |
|---|---|---|
| Best bid and ask | Yes | Yes |
| Last traded price | Yes | Usually |
| Size available at the best prices | Yes | Yes |
| Multiple price levels | Usually no | Yes |
| Market depth | Limited | Greater |
| Market maker or venue details | Usually no | Sometimes |
| Individual order visibility | No | Depends on the feed |
| Typical users | Long-term investors | Active and professional traders |
What Does Level 2 Market Data Show?
Level 2 data normally shows a limit order book with buy orders below the current market price and sell orders above it.
The Bid Side
The bid side shows buyers waiting to purchase shares. A quote may include:
- Bid price
- Number of shares available
- Exchange or trading venue
- Market maker identifier or participant code, depending on the feed
The Ask Side
The ask, also called the offer, shows sellers waiting to sell shares. It may include:
- Ask price
- Number of shares available
- Exchange or venue
- Market maker or participant identifier
For example:
| Bid Price | Bid Size | Ask Price | Ask Size |
|---|---|---|---|
| $49.98 | 500 shares | $50.02 | 300 shares |
| $49.97 | 1,200 shares | $50.03 | 800 shares |
| $49.95 | 2,000 shares | $50.05 | 1,500 shares |
Here, the best bid is $49.98, the best ask is $50.02, and the bid-ask spread is $0.04. The other rows show visible orders beyond the best bid and ask.
Is Level 2 the Same as Market Depth?
Level 2 is a form of market depth, but the information depends on the exchange and data provider.
The term "Level 2" does not have one universal definition. Nasdaq defines its Level 2 data for Nasdaq-listed stocks as the best-priced orders or quotes from each Nasdaq member displayed in the Nasdaq Market Center. Its TotalView product provides broader depth, including all displayed orders and quotes from Nasdaq members and aggregate size at each price level.
Depending on the platform, "Level 2" may refer to:
- Quotes from multiple market makers
- Several price levels on one exchange
- Aggregated depth by price
- Market depth for futures contracts
- A combination of venue, size and order-book information
Check the provider's product description before assuming that two Level 2 subscriptions provide the same data.
How Is Level 2 Different From Level 1 Data?
Level 1 data shows the top of the market. Level 2 data shows additional visible interest behind the best bid and ask.
Level 1 commonly includes:
- Last trade price
- Last trade size
- Current best bid
- Current best ask
- Available size at the best bid and ask
- Daily high, low and volume
The SEC describes basic market data as including the last sale price, size and exchange, along with each exchange's highest bid and lowest offer and the national best bid and offer. Depth-of-book data adds quotes available at other price levels.
A simple comparison:
- Level 1 may show: $50.00 bid for 500 shares, $50.05 ask for 300 shares
- Level 2 may also show: $49.98 bid for 1,000 shares, $49.95 bid for 2,500 shares, $50.08 ask for 700 shares
Level 1 gives you the best available prices. Level 2 gives you more of the visible order book.
What Can Traders Use Level 2 Data For?
Traders use Level 2 data to study displayed liquidity, estimate order costs and manage trade execution.
Assessing Liquidity
A deep order book may show a large amount of displayed size close to the current price. A thin book may indicate that a large order could move the price.
CME Group describes real-time market depth as useful for assessing liquidity and executing larger orders.
Estimating Slippage
Suppose a trader wants to buy 5,000 shares, but only 500 shares are offered at the best ask. The remaining shares may execute at higher prices. Level 2 can show the available displayed size at successive ask prices.
Studying Buying and Selling Pressure
Some traders compare the visible size on the bid and ask sides. A larger bid may indicate stronger displayed buying interest, while a larger ask may indicate stronger displayed selling interest.
That comparison describes visible orders. It does not reliably predict the next price move.
Planning Limit Orders
Level 2 can help traders place a limit order in relation to:
- Existing liquidity
- The bid-ask spread
- Large visible order levels
- Nearby prices with limited displayed volume
Monitoring Execution
Active traders can watch whether their order is filling, whether displayed liquidity is being consumed and whether the spread is widening or narrowing.
What Are the Limitations of Level 2 Data?
Level 2 data is incomplete, changes quickly and does not guarantee a particular market move or execution.
It Usually Shows Displayed Orders Only
Hidden orders, reserve orders and other non-displayed liquidity may not appear in the visible order book. CME's distinction between Market by Price and Market by Order also shows how feeds can differ. One may display aggregated quantities, while another may show individual orders and queue information.
Orders Can Be Canceled Quickly
A large displayed order may disappear before it trades. The order book changes constantly, so a quote visible at one moment may not be available when an order reaches the market.
One Feed May Not Represent the Whole Market
U.S. equities trade across multiple exchanges and other trading venues. A Level 2 feed limited to one exchange or market center may not show every available order across the national market. The SEC distinguishes exchange-specific depth feeds from broader consolidated market data.
Level 2 Does Not Identify Trader Intent
A displayed order does not reveal whether the trader wants to complete the trade, plans to cancel or is using the order for another strategy. Use Level 2 alongside price action, volume, trade data and a defined trading plan.
It Does Not Guarantee Execution
Seeing 1,000 shares offered at a price does not mean your order will receive all 1,000 shares. Orders may be ranked by price, time, order type or venue-specific matching rules.
Is Level 2 Market Data Worth Paying For?
Level 2 is worth considering when order-book information affects your trading or execution decisions. It is generally unnecessary for a buy-and-hold investor.
| Trader Type | Value of Level 2 |
|---|---|
| Long-term investor | Usually low |
| Occasional stock trader | Often limited |
| Day trader | Potentially high |
| Scalper | Often important |
| Trader executing large orders | Useful for liquidity and slippage analysis |
| Futures trader | Useful, although the product may be called market depth, Market by Price or Market by Order |
Futures platforms may use different terms. CME Group's Market by Order data can show individual order sizes, queue position and full order-book depth. Market by Price aggregates the quantity at each price level.
Bottom Line
Level 2 market data shows visible orders beyond the current best bid and ask. It can help active traders evaluate liquidity, estimate slippage, place limit orders and monitor execution.
The data is venue-specific, incomplete and subject to rapid changes. Level 2 earns its cost when it changes how you size, place or manage trades. For most long-term investors, Level 1 data is enough.