Level 2 data

A tier of market data, named by the depth it carries. Level 1 is the best bid, the best offer, and the last trade with its size: enough to know what a small order would meet. Level 2 adds the queue behind those prices, listed price level by price level with the quantity available at each, usually aggregated so that all the interest at one price appears as a single line. A further tier, showing every individual order rather than the aggregate, exists on some venues and is rarely distributed to retail.

Where it comes from decides what it means. On an exchange there is one central order book, so the venue's Level 2 feed is an authoritative record of what rests there. In over the counter markets, and foreign exchange above all, there is no central book at all: the ladder a platform displays is the aggregate of the quotes that particular broker's own providers are streaming to it. Two brokers therefore show genuinely different ladders for the same instrument at the same instant, and neither one is the market.

The trip is treating displayed size as committed size. Streamed quotes can be withdrawn, resting orders can be cancelled faster than a screen refreshes, an iceberg order deliberately displays a fraction of what it carries, and in an aggregated feed the same underlying liquidity offered through two routes can be counted twice. Practitioners disagree about how much the ladder reveals about intent, since size posted to be seen and size posted to be filled look identical on the screen. What is not disputed is its use after the fact: the ladder describes how far an order of a given size would have had to walk before it filled, which is the arithmetic behind slippage.