Level II

[funk101]

How "true" is the Level II data? Meaning, I heard someone say that Level II data is somewhat used to "trick" traders into believing there's trades at certain prices but in fact it's there to just sway the trader. Know what I'm getting at? I know there's a lot of manipulating going on in the market anyway, I was just trying to glean some insight into how much weight one should put on the LII data when trading futures.

[-Swig-]

Depends on the markets you're looking at, the time of day, and perhaps even the state of the market at any given time. During the Australian SPI overnight session for example, there are often spoof orders that vanish or move as soon as you place one.

The best way to find out is probably to place orders over time (away from best) and observe how they affect other orders currently on the book.

'Course that's more viable in an illiquid market (like the SPI overnight), but I'd hazard a guess that spoof orders are less common in very liquid markets due to the increased difficulty of getting them out of the way fast enough.

Could be wrong though, particularly with the latency arms race going on.

[ctrlbrk]

Swig summed up my opinion on this as well.

I often find even during a very liquid market like SP500 you'll see these huge blocks lining up on the bid, say 2000-3000 contracts. Your first inclination might be that they will hold the price up. But, in my experience, many times this is a sign of the exact opposite because in reality they start pulling their orders very quickly and the price indeed falls.

Now, there are other times when it is extremely clear that big muscle like GS or etc is holding the price (usually during chop or big numbers like '50 and '00 (900, 950, 1000). Their system will throw as many contracts as it takes to keep the price where they want it. It's like keeping a lid on the action, when all the small retail guys are begging to get out of the jar.

Then GS or the likes will take the lid off and the bubble will burst, when they've finished unloading or buying or whatever their objective was.

Mike

[captaincolor]

just fyi funk, level II data may be changed at any time by market makers. beware. it aint necessarily the truth. my guess is they dont have time to mess with it all that much but im sure they horse with it more than occasionally.