What Is Stage 2
First introduced in 1983 since the Nasdaq Quotation Dissemination Service (NQDS), Stage 2 is a subscription-based supplier that provides real-time get right of entry to to the NASDAQ order guide. It is intended to turn market depth and momentum to consumers and buyers.
The supplier provides value quotes from market makers registered in every NASDAQ-listed and OTC Bulletin Board securities. The Stage 2 window presentations the bid prices and sizes on the left side and ask prices and sizes at the correct side.
Key Takeaways
- Nasdaq’s Stage 2 subscription supplier provides market depth and momentum statistics to consumers. It is intended to provide a bird’s eye view of market movement.
- The additional knowledge related to pricing movement and market momentum supplies consumers and buyers a leg up in imposing purchasing and promoting strategies.
Basics of Stage 2
Stage 2 provides shoppers with depth of value knowledge, at the side of the entire available prices that market makers and virtual dialog networks (ECN) post.
Stage 1 supplies enough knowledge to meet the wishes of most buyers, providing the internal or best possible bid and ask prices. However, full of life consumers often need Stage 2 because it presentations the provision and demand of the fee levels previous or outside of the national best possible bid offer (NBBO) value. This gives the individual a visual display of the fee range and comparable liquidity at each value level. With this knowledge, a broker can make a decision get right of entry to and or cross out problems that ensure the liquidity needed to whole the trade.
Price movement on Stage 2 is not necessarily an actual reflection of the recorded trades; Stage 2 is just a display of the available value and liquidity. This is an important distinction because of high-frequency purchasing and promoting methods continuously regulate Stage 2 bid and ask prices violently to shake the trees and panic onlookers without reference to the lack of precise carried out trades. This custom isn’t strange in momentum stocks.
Stage 2 and Reserve and Hidden Orders
Many ECNs, which may well be the automated techniques that have compatibility acquire and advertise orders for securities, offer the facility for consumers to post reserve orders and hidden orders. ECNs most often display the most efficient available bid and ask quotes from multiple market people, they in most cases moreover automatically have compatibility and execute orders.
ECNs offer a reserve order risk, which is composed of a price and display size along with the actual size. This order only presentations the correct display size on Stage 2 as it hides the actual size of the entire order.
Hidden orders, which may well be an risk where buyers can cover large orders from {the marketplace} on the ECN, function in a similar way then again are invisible on Stage 2. This allows for additonal discretion in understanding prices. One of the most highest techniques for patrons to make a decision the status of reserve or hidden orders is to check the time and product sales for trades at the indicated prices.
Benefits of Purchasing and promoting The use of Stage 2 Quotes
The primary benefit of using Stage 2 quotes is getting access to a wealth of data related to {the marketplace}. This data can be used in relatively a large number of ways for profit-making. For instance, you are able to examine liquidity volumes and order sizes for a stock traded on Nasdaq. You can moreover decide dispositions using information about bid and ask orders.
- Important knowledge related to market makers and institutional buyers is also available in Stage 2 quotes. Consumers can use this knowledge to their get advantages. For instance, they can gauge an institutional investor’s hobby in a large stock from their order sizes and place an an identical orders. A an identical method can be used with reserve orders, which may well be large orders broken into smaller-sized somewhat so much. Once they’ve known hidden orders from L2 quotes, consumers can place an identical orders because of institutional investor movement will lend a hand make stronger and resistance levels for that stock’s value.
Example Stage 2 Quote
There are six very important columns in a Stage 2 quote for a given stock. The main one is MMID. This column identifies the four-letter identification for market makers. The second column is Bid or the fee that {the marketplace} maker is ready to pay for that stock. The third column is Measurement. This column is the choice of orders situated throughout the market maker at that size.
The remaining 3 columns at the correct hand side are an identical. The one exception is Ask, which is the fee that {the marketplace} maker is ready to advertise that stock value. Consumers can use the difference between the bid and ask prices to make a decision pricing pressure and enforce purchasing and promoting strategies.
