ECN Level III Book View

Quote from Surdo:

I am talking about being the HIGH BID or LOW offer with your own name!

Right now if you enter an order it has to go through whoever you clear, are you new?
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Entering an attributable (not anonymous) quote is a characteristic of the order entry system, not a characteristic of the market data system.
e.g. the quotes that are entered by a broker (say MSCO) through their order entry are displayed with that mpid on the level 2...

Any firm that has its own MPID can do this.


I'm still scratching my head on what the L3 is... or whether it is real or just a myth...
:confused:

(and yeah, I've been new for the last 8 years :) )
 
"Level 3 is used by the market makers and allows them to enter their quotes and execute orders.[citation needed]" -- Wikipedia

You don't need "level 3" to enter quotes or execute orders.. if you wanted to execute an order right now you'd go to market. putting out a quote is equivalent to putting out a limit order.

I searched 'Level3' and this post was the 4th result.. and a wikipedia quote without a citation... so... yeah.. that should tell you something.


Quote from cerco:

The ECN full book (Level III) used by MM's (market makers) which includes size for each price tier buy and sell side - showing large orders or clusters of orders away from the current market indicating support and resistance levels. This can be used to "hunt" stops, triggering them to drive the price lower in order to buy the stock at lower prices.
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If your the only one bidding or offering... if you adjust your offers higher and your bids higher.. you can "move the market" because your the only one actively quoting that market.. but if a market order comes in thats large enough to blast through all your bids or offers.. then whoever is blasting is moving the market.. (even tho your the market maker)


You dont have to be a 'market maker' to move markets


Quote from Surdo:

As far as I can remember back to the dark ages of working on a desk, the key difference between Level III on NASDAQ and Level II is the ability to enter and move your own market. TotalView has everything a MM has without the ability to move your market.
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What are you saying, LEVEL III is a myth?

If I wanted to smoke the bids with only 1K shares to every marketmaker on the bid as opposed to hitting the market with 20K @ the market, you can not do this on a retail platform.

Have you ever worked on an institutional desk?
 
Quote from JuniorCTA:

"Level 3 is used by the market makers and allows them to enter their quotes and execute orders.[citation needed]" -- Wikipedia

You don't need "level 3" to enter quotes or execute orders.. if you wanted to execute an order right now you'd go to market. putting out a quote is equivalent to putting out a limit order.

I searched 'Level3' and this post was the 4th result.. and a wikipedia quote without a citation... so... yeah.. that should tell you something.
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Yes, this is what I noticed too. Is Level 3 only available from NASDAQ or also from NYSE? Idk if "Level 3" is just not an easy to google phrase or if there's just no information available outside the institutional world?
 
Quote from Surdo:

What are you saying, LEVEL III is a myth?

If I wanted to smoke the bids with only 1K shares to every marketmaker on the bid as opposed to hitting the market with 20K @ the market, you can not do this on a retail platform.

Have you ever worked on an institutional desk?
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I don't even understand what your saying.


Lets try this example:
$10 - 10
$9 -5
$8- 9
$7-5
$6 -2
1-$5
4-$4
6-$3
2-$2
3-$1

Market is $5 bid for 1 and $6 bid for 2


Now if someone wants to buy 16 lots at market

The first 2 lots are executed at $6, the second 5 lots @ $7, and the 9 lots at $8

INSTANTLY


There is two things that can happen after this:

1). After the trade, there may be new offers that arrive that tighten the market back to $5 bid @ $6

OR

2). Bids improve, and move to $7-- from $5. (these bids arent necessarily BUYING, as BIDS are PASSIVE (waiting to get hit by a market SELL order))


Do you even know what market micro structure is?
 
Quote from Surdo:

What are you saying, LEVEL III is a myth?

If I wanted to smoke the bids with only 1K shares to every marketmaker on the bid as opposed to hitting the market with 20K @ the market, you can not do this on a retail platform.

Have you ever worked on an institutional desk?
More...

Well, supposedly Level 3 is only available to NASD member firms. Therefore, there are most likely penalties for sharing that information outside the firm, and most likely, due to the exclusivity of the recipients of this data, they will most likely not want to share it. So, it might as well be a myth unless you join a member firm.
 
Quote from JuniorCTA:

There is two things that can happen after this:

1). After the trade, there may be new offers that arrive that tighten the market back to $5 bid @ $6

OR

2). Bids improve, and move to $7-- from $5. (these bids arent necessarily BUYING, as BIDS are PASSIVE (waiting to get hit by a market SELL order))


Do you even know what market micro structure is?
More...

I do appreciate the Wiki lesson on market-making, this is not how it works in the institutional world FYI.
 
Quote from Surdo:

I do appreciate the Wiki lesson on market-making, this is not how it works in the institutional world FYI.
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FYI Your wrong... This is exactly how it happens. IN the institutional world they aren't hitting or lifting anything.


BUT they do go to a market maker who gives them the quote.


When paper agrees to the quote provided.. they get executed.. and THEN the market maker starts lifting/hitting offers/bids to get a better price than what he quoted the paper(institutional)
 
Son, you are a bit confused, a MM is obligated to execute on his quote before he moves. If I am on the bid for 1M shares I am only obligated to honor my size, if I am real, and get hit with say 25M, I can buy them all if it fits.

If a customer comes in to a salestrader who comes to me the MM with 100M to buy, I might stop him on 25M and go on the offer. (YES THE OFFER...NOT A TYPO) If the market starts to move up, I might take the stock a few levels to lower my risk. Once I have my short in, I then get cute on price and see if the client wants to chase the stock.

You are confusing an institutional customer that calls a salestrader with the role of a marketmaker. There is ZERO communication
between competing MMs. 25 years ago you called the MM and asked for a quote!

I worked on an institutional desk for over 10 years, and have a clue of the mechanics of marketmaking and covering institutional clients, I do not know what you are trying to prove???
 
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