What is Level II?

Many beginners among traders are asking the question what is the Level II, why does everybody talk about it and what is it for. This article will help to completely understand these issues.
In order to figure out what is Level II, first of all, it is necessary to understand the U.S. exchange infrastructure. Each stock has listing on one particular exchange. For the share it is so-called primary market, or that market, where the company undertakes the IPO. For the opportunity to trade on exchange each company pays the annual fee. Historically, the company’s stocks were traded not only on the primary market, but also in other places. In 19th century stock trading took place not only on the exchange, but also in such regional centers as Boston, Philadelphia, Chicago. Nowadays nothing has changed and many stocks are traded on regional exchanges along with the primary market. In the late 90s along with the computer networks development the Electronic Communication Networks (ECN) start to appear. At the moment one ticker can be simultaneously traded on NYSE, regional exchanges and ECN. There is no common place in the USA for the shares float. In order to receive guaranteed execution at the best prices the NBBO rule has been introduced. No matter where you send the order, this rule guarantees the execution at the best prices.
Now let’s look at the Level I quotes. First of all, Level I is the best price for buying and selling with a limited orders size at these prices as well as price and size of the last transaction. Besides, the Level I feed consists the information about opening price on a current day, the highest price on a current day and the lowest price on a current day. Level I quotes can be translated into different windows – from the marketmaker window to the watch list window.
And now let’s talk about the Level II quotes. What is the Level II? It providers a deeper view. In Level II we can see not only the best bid and best ask with a size of orders at these prices, but also the deeper price levels with orders sizes. Roughly speaking, the Level II is a market depth. But unlike the classical order book the Level II shows not aggregated orders for each price level, orders for each price levels for each exchange and ECN.
Что такое Level II
Many of you probably faced such phrases as full Level II, incomplete Level II, Open book, ECN book. And again there are many questions arise.
Full Level II means deep quotes from all exchanges and ECNs, such as ARCA, BATS, Direct EDGE, NSDQ, FLOW, etc.
Usually when people say “incomplete” Level II, it is assumed that there are deep quotes, but not all trading platforms are displayed. For example, there is a depth of only ARCA and BATS without other trading platforms. Each electronic trading platform has its own Level II – this is an Order Book of a particular stock at this electronic trading platform (the so-called ECN book or NYSE Open book, if we are talking about deep quotes with the NYSE stock exchange). BUT! Do not mix up Open book and Level II. Full Level II includes Open book quotes and quotes of other ECN. Quotes feeds with description you can find below. Depending on the connected feeds, depth of Level II will be different.
• nyse level1 quote, high, low, open, NYSE stocks chart
• nyse openbook NYSE limit orders book
• nyse amex level1 quote, high, low, open, AMEX stocks chart
• nyse arca otc/utp ARCA limit orders book for NASDAQ stocks
• nyse arca book tape a/b &etf ARCA limit orders book for NYSE and ETF stocks
• nasdaq level 1 quote, high, low, open, NASDAQ stocks chart
• nasdaq total+openview Level II for NASDAQ stocks
• direct Edge book limit orders book for EDGA и EDGX
• bats book limit orders book for BATS

In different terminals quotes are connected differently. For example, in terminal Fusion each quote feed connected and paid separately, and in terminal Takion all quotes are included in monthly fee.