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Registered User
Joined: 11/1/2006
Posts: 14
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while looking at some level 2 data, i will sometimes see bid at 11.80 ask at 11.89. then in the latest transactions i might see that a transaction happened at 11.84. just curious as to what might cause this since the bid and ask did not come together?
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Registered User
Joined: 6/13/2011
Posts: 88
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QUOTE (chasd1) while looking at some level 2 data, i will sometimes see bid at 11.80 ask at 11.89. then in the latest transactions i might see that a transaction happened at 11.84. just curious as to what might cause this since the bid and ask did not come together?
Lots of things can cause that.
First of all, I am not sure what stocks you are looking at, but a 9 cnt spread is a huge spread. Usually stocks with low liquidity and no dynamics display a spread like that.
If that is the case, the MM wants to play with you and take your money. Be careful.
In a imaginary case in which you find a dynamic stock with liquidity and displays a spread like tht, if you see someone stepping on the bid is because for some reason they want to get in the stock NOW.
Ocassionaly someone pushes the wrong botton and buys what they never meant to buy.
It could be a lot of things. You need to use Level II on conjuction with TOS to decipher further.
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Registered User
Joined: 11/1/2006
Posts: 14
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Thanks Bill. I am doing some homework on this and it is interesting. I am not trading with this now, again just educating... about the lies on level 2.
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Registered User
Joined: 4/4/2011
Posts: 4
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There may be liquidity between the spread. Just because the order isn't displayed on Level II doesn't mean its not there. A spread of 11.80 and 11.89 may have a bunch of orders in between (i.e. BATS hidden/BATS dark, or various dark pools). I have been able to take advantage of these situations by testing different dark books to get price improvement.
There is an overall advantage to this in that dark pools don't hold levels on level 2. The price level can break before all of the shares are taken from the dark pool. Buying a block at the market will probably drive the price (and ask at 11.89) on the aforementioned stock several cents, wheras the order may be taken care of on a dark book between the spread while having little or no affect on the ASK.
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