Financial quote
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A Financial Quotation refers to specific Market data relating to a security or commodity. While the term quote specifically refers to the bid or ask of an instrument, it may be more generically used to relate to the last price which the security traded at ("last sale"). This may refer to both exchange-traded and over-the-counter financial instruments.
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[edit] Bid and Ask
The bid (or buy) and ask (or offer,sell) of a security are the prices (and often quantities) at which buyers and sellers are willing to purchase or sell. The bid shows the current price at which a buyer is willing to purchase shares, while the ask shows the current price at which they are willing to sell. The quantities at which these trades are placed are referred to as "bid size" and "ask size." For instance, if a trader submit a limit order to buy 1000 shares of MSFT at $28.00, this order will appear in a market maker for MSFT's book (finance) with a bid of $28.00 and a bid size of 1000.
[edit] Equities
[edit] Level 1 Access
Level 1 quotations represent realtime bid/ask data, the most commonly displayed market data. Level-1 data typically will display the Best-Bid-Offer ("BBO" or "Inside Quote"), i.e. the lowest ask and highest bid available at the time for a given security. It may or may not display quote size.
[edit] Level 2 Access
Level 2 data displays the top-of-book for each market participant in a given security. In other words, at a given time there may be several market makers participating in trade-matching for a specific stock. Level-2 data will display the highest offer and lowest ask for each market maker.
So-called Level 2 Information is of some interest to Stock Market day-traders and brokers/dealers as it typically depicts the buying and selling pressure behind individual stocks and other securities quoted on markets around the world.
Similar in format to live streaming share prices, a typical Level 2 screen is split in two vertical halves and will show orders on both the bid price of a security (left hand side) and the offer price (right hand side).
On major heavily traded stocks the "depth" of the orders can quite often be in excess of 20/30 orders to both buy and sell at lower (left) and higher (right) prices.
Traders can use this live information to predict the short-term movement of a share or security in conjunction with volume traded, and attempt to profit from this information, which is usually legal as the information is in the public domain. The reason for this is that Market Makers sit “behind” such a screen by being obliged to both buy and sell the share at the posted price up to what is known as normal market size.
For certain market centers such as NASDAQ, a full depth-of-book (DOB) is available, whereby every quotation for every market participant is displayed.
[edit] See also
