Real Nasdaq Level Ii, Fake Nasdaq Level Ii?????

Quote from kapama:

I met this experienced trader who was talking about how he was using Nasdaq Level II platform and talking about his strategies and he told me that not every Nasdaq Level II trading platform is same and some of them are fake and some of them are real.

According to him, if you utilize the Nasdaq Level II trading platform of Scottrade or other smaller brokerages like ZECCO, the bids and asks you are seeing on the screen are not necessarily asks and bids of real people but in reality prices are manipulated (marked up) by the brokerage.

In other words, when you sell, you are selling 2 or 3 cents less than what the market really bears at that moment. The difference is pocketed by Scottrade. He mentioned that they monitored different Nasdaq Level II platforms at the same time side by side and they had all different prices for the same volumes for the same stocks.

He also added that the only true Direct Access platforms (Nasdaq Level II) where George's bids and asks meet John's with no middle man manipulation is Fidelity, Terranova, Cybertrade and Tradestation Direct Access Platforms.

Anyone has an idea if this is true or not?

Can you recommend any brokerages that offers low commissions for unlimited shares and REAL Nasdaq Level II platform?
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I always wondered about the "payment for order filled" (payment for order flow?) that exists with some deep discount brokers like Scottrade. I know brokers who use PFOF will receive compensation for sending their clients' orders to a market maker for execution. So, how does that market maker make up for this payment to your broker?

Does it manifest in the market maker executing between the bid and ask and not giving the retail customer this benefit?

I had both Scottrade and Fidelity and although I never noticed a difference in the best bid/ask quotes, my executions with Scottrade were just terrible. I never got price improvement. With Fidelity, I frequently have buys below ask and sells above bid with market orders.

Suffice it to say, I'm much happier with Fidelity. If you trade frequently or have > $1 m, stock trades are just $8 for unlimited shares.
 
Well, I am trading 4 times a week and my minimum is like 10 thousand shares for each trade. I guess I need a broker that will charge me a flat fee for unlimited shares like Fidelity.

Any recommendations?
 
Real level 2 would be from a direct access firm. There are many of them. Now that you know this level 2 is pretty much useless due to black boxes and algorithms etc.
 
Why are you saying it is useless??

If I am in the market to buy 10,000 shares and if I am using Scottrade and give a market order, they will kill me with the pricing. But if I use direct access then I can see what I am really paying.

Am I clear?

So it seems like, direct access is a must have for me. Wouldn't you agree?
 
Quote from kapama:

Why are you saying it is useless??

If I am in the market to buy 10,000 shares and if I am using Scottrade and give a market order, they will kill me with the pricing. But if I use direct access then I can see what I am really paying.

Am I clear?

So it seems like, direct access is a must have for me. Wouldn't you agree?
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First of all why would you put a market order in for 10,000 shares. Second of all put a limit order in with any broker and you won't have to worry about stealing of order flow etc.
 
“In other words, when you sell, you are selling 2 or 3 cents less than what the market really bears at that moment. The difference is pocketed by Scottrade. He mentioned that they monitored different Nasdaq Level II platforms at the same time side by side and they had all different prices for the same volumes for the same stocks.”

How would Scottrade pocket the difference? Do you believe that in the span of micro seconds ( fraction of a second) they decide if they want the other side of your trade and then front run your order? Not only is it illegal its easily traced. There are plenty of direct access brokers other then the ones you posted.

Very few services out there especially those that are aimed at retail traders will include the entire universe of prices, especially in the very very deep stocks. Simply put there is too much data.

You can look at the screen from ½ a dozen services on the professional side and see lag times that’s just a fact of life. The lags are not great enough for arbitrage.

We clear through both FIMAT and Goldman and there is always a fraction of a second different in out screen on all kinds of products not just stock.



“the fact that these exchanges even charge fee for data or getting quote or even pay for bullshit level II quotes really says something about these brokers and exchanges.”

How do you expect the exchange to pay their bills? Not the member the exchange themselves provides the market place and has bills to pay too. Don’t be ridiculous.


“the market makers (brokers) broker/dealer put fake bids and ask in level II or market. everytime a trade takes bait,,,they make more money than you fucking commission”

Fake bids LOL you can go ahead and hit all those bids you see on the screen and no one forces you to trade in markets you don’t like. Those bids and offers are real and if you’re intimidated by them they you should not be in the market.

“they are machines who make the market. same guy(1 market maker) on the bid and ask. especially in afterhours.”

During the trading day one guy from a MM firm may make markets in dozens of stocks or in the case of something like DELL or MSFT for example there are hundreds of MM’s fielding order flow from many mant vendors and only has time to make markets in one stock. In after hours there is no real market making function. No firm is required to make 2 sided prices in any stock, unlike in regular hours where the mm’s are required to make 2 sided prices. The after hours is essentially a free for all and those with access to the order flow are the ones who make the real money.


“always wondered about the "payment for order filled" (payment for order flow?) that exists with some deep discount brokers like Scottrade. I know brokers who use PFOF will receive compensation for sending their clients' orders to a market maker for execution. So, how does that market maker make up for this payment to your broker?”

Every broker even the direct access guys has payment for order flow deals set up and they have soft money deals and rebate deals, that’s just a fact on how the markets work. The reason they can offer low commission rates is because they get deals on the back side of your trades. Lets go back to the DELL or MSFT example. There are 150 to 200 market making firms who make prices in those two names, They all want as much order flow as they can so they do deals with all the brokerages to take a piece of their order flow for a price. Its been going on for decades.
 
This is one bizarre thread. "Fake bids and asks" I love it. MAYBE you could have written this thread in 1993 and I may have believed that part of it.
 
Quote from pdwst33:

This is one bizarre thread. "Fake bids and asks" I love it. MAYBE you could have written this thread in 1993 and I may have believed that part of it.
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Agreed. Really hard to figure out what is up with this guy. Very weird.

Weirdest part is that he supposedly talks to an OLD EXPERIENCED TRADER who told him not to trust Level 2 quotes. Yet the same OLD EXPERIENCED TRADER is unable to tell this guy how to place orders. Very weird.

But you have to give him some respect because he is such a HUGE HUGE HUGE HUGE HUGE trader.
 
Quote from futuresRX:

I'm pretty sure brokerages don't mark up, but some Level IIs might not include quotes from all market makers and ECNs. Direct Access brokers will generally have TotalView, which shows you every single quote from each ECN.
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It should be noted however, that IB's "Total View" isn't the "total view". Maybe someday.....
 
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