What is a level 2 trading platform
An appropriate way to approach our what is a level 2 trading platform would be in the academic spirit. Let us turn to the investopedia. Level II shows the best bid and ask prices from each of these participants. It also shows whether the last trade tick was up or down, then comes the Last the last traded priceand the Net Chg change for the day.
In this case the numerical representation shows where the option contract is currently trading at the penny wide Bid and Ask spread, the Bid being what is a level 2 trading platform. This is listed under the price and highlighted in yellow. Under Depth we are told that at that very moment in time there were four market participants bidding while six were offering at that price level. This summary information, given to us on the Summary Pane, is good but it does not give us any specifics on the size and the names of market participants.
Now, let us go slowly through these specifics. The above table shows that the Bid and Ask spread for BOX is a nickel wide while the real market is only a penny wide. A trader not using a Direct Access Trading DAT platform might be getting hit by this wide slippage every single time an order is routed. Each trader should know whether his or her platform is or is not a DAT.
What is a level 2 trading platform conclusion, routing for all option trades should be done through a DAT platform so that slippage can be minimized. Disclaimer This newsletter is written for educational purposes only.
By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader.
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