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Live4TheRisk

Level II Questions

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Something that's been bothering me for a while when looking at Level II quotes. I'm still a beginner at this so please forgive me. To be competitive the bidders (BID) want to pay the highest price that will allow them to get filled and the sellers (ASK) want to sell at the cheapest price to get filled. How come AAPL has a market maker called EDGA that doesn't get filled. They are asking 597.98, why wouldn't anyone pick that up. What am I missing here??? On the flip side they are looking to buy at 560.00 so i understand why no one wants to sell them at that price since the market price is ~650 as of today.

 

What gives here?

Level2.jpg.8ced04858c3a5964503d3d72efce0323.jpg

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Something that's been bothering me for a while when looking at Level II quotes. I'm still a beginner at this so please forgive me. To be competitive the bidders (BID) want to pay the highest price that will allow them to get filled and the sellers (ASK) want to sell at the cheapest price to get filled. How come AAPL has a market maker called EDGA that doesn't get filled. They are asking 597.98, why wouldn't anyone pick that up. What am I missing here??? On the flip side they are looking to buy at 560.00 so i understand why no one wants to sell them at that price since the market price is ~650 as of today.

 

What gives here?

 

I think you have this the wrong way around. Buyers want to bid the lowest price they can to get filled and sellers want to offer the highest price they can to get filled.

 

I don't know about the market maker. But don't they have certain quote obligations rather than specific trade obligations?

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I think you have this the wrong way around. Buyers want to bid the lowest price they can to get filled and sellers want to offer the highest price they can to get filled.

 

I don't know about the market maker. But don't they have certain quote obligations rather than specific trade obligations?

 

Well Level II is just a big auction between market makers. They all will put in a bid and an offer and then they wait until someone acts on that price. Its confusing because as traders we look to buy on the ask and sell on the bid price. But when you look at through the market makers eyes its the total opposite, they are buying on the bid and selling at the offer. Isn't this just so confusing :).

 

So if the market maker puts in a bid they might decide they want to buy at a certain price but are not getting filled, they might up their bid and get filled quicker. This is what i meant in my Original Post. Its called the inside bid (highest price for bidders), the inside ask (lowest price for sellers).

 

This is why I am confused when I look at the inside ask of AAPL. Not sure what you mean by quote obligations or trade obligations, can you explain?

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With the large amount of HFT in the market today, level 2 is not of much use compared to 15/20 years ago. Too many fake quotes.

 

Exactly, i asked my friend that used to be a trader and he explained to me that its a fake/stuck quote so its ok to ignore it.

 

How does HFT trading create these fake quotes?

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