All about Level I & II Data feeds!
Basic information about data feeds:
One of the most important tools traders use to trade is market data, commonly referred to as Level I and Level II data feeds. This data includes information about current prices and recent deals. Basically, Level II provide more information than Level I data, whether you really need it is more detailed in this article.
Traders decide which data feed they need for their trading style and subscribe to this data feed through their broker or directly from the provider. Level I and Level II can vary costs depending on the broker and provider. With a capitalized futures account and the classification as “Non Proffesional” considerable costs can be parsed. You always need to know where your market data comes from and can trust that data 100, it’s about your money.
Therefore, pay attention to the differences in data feeds so that you don’t pay for something you don’t need.
There are some trading platforms mainly from the Russian-speaking area that pass on market data very “cheap” or even without dispensing the exchange fees to their customers. This is a) Illegal b) not transparent and c) Don’t know where your market data comes from. You have no chance in the event of a complaint, misexecution or complaint of a trade. Orderrouting is not the same as data feed!
Just like the right broker choice (ultimately it’s about your money and your security when trading on the stockexchanges) it is also important to have a trustworthy and legal source for your brand data!
Using the example of the CME:
The data feed for CME markets costs you with broker and capitalized account usually 15 dollars exchange fees per month – only through the broker and capitalized account can they be managed as non-professional and get these favorable prices.
The same data feed will cost you if you book a software without a broker or direct with a feed provider for around 115 dollars a month, since the “Non-Professional” rating by the exchange is only awarded to clients with a capitalized account and licensed brokers.
This is the pure exchange fees that are collected by the respective exchange, in addition to trades, unless they take place on the demo account routing/order fees. These fees are specified by brokers as a round turn – i.e. opening and closing a position or contract/piece. (Routing Fees + Broker Fees)
Delayed market data usually does not incur exchange fees – depending on the stock exchange, this is between 15-30 minutes delay. Basic fees to some feed suppliers may still apply (API basic fees).
An official list of “vendors” (data feed suppliers who are allowed to supply you with data feeds of the exchange can be found on the websites of the exchanges e.g. here CME/EUREX). These companies pay a very expensive license to the exchanges in order to distribute the market data to their customers – Exchange Fees nevertheless the end customer always pays. Companies like CQG or Rithmic live exclusively from the order routing fees, another reason why data feeds without brokers are much more expensive.
Should they come across trading platforms that provide you with data feeds for dozens of different exchanges (only CME costs are described in the upper example) at a “tempting” price or even free, this is very obviously illegal and very questionable – this Providers and their “advertisers” also seem to care about driving your customers into the illegality – I can only advise you against this!
At the end of the day, everyone has to decide for themselves whether you want to count yourself among the professional dealers. Also, everyone should be able to pay the 15 dollars per month to the stock exchange. But now to the actual account:
Level 1 Data feed
The basic market data is called Level I and includes the following information:
- The highest price at which someone is willing to buy an asset. (Depth of Market 1)
- The number of stocks, Forex lots or contracts that traders try to buy at the money price.
- The lowest price at which someone is willing to sell an asset. Also called “offer price”. (Depth of Market 1)
- The number of shares, Forex lots or contracts sold at the bid price.
- The price at which the last transaction took place.
- The number of shares, Forex lots, or contracts involved in the last transaction.
Level 1 market data provides all the information required to trade most chart-based trading systems. If you are trading with Priceaction or a technical indicator-based strategy, only Level I market data is required.
Scalpers or traders who trade due to changes in the way other market participants offer and offer (order book) usually use Level II data feeds that display multiple prices at BID and ASK.
Level II Data feed / Orderbook
Level II provides more information than Level I data. Mainly it shows not only the highest bid and offer, but also bids and offers at other prices – The Order Book.
- Depending on the provider of the data feed, 5 up to the complete order book depth with all orders parked there are displayed in real time including the change. In other words, you will see not only the current commandment, but also all the commandments below and above it.
- Bid sizes: In stocks, all of the .01 and futures are typically shown as one bid per tick. If there is a gap between the current bid and the next bid, it usually means that the stock or contract has a larger money/letter margin (spread).
The Level II market data provides the additional information required for trading due to changes in BID and ASK.
Level 2 also show you data at which point your limit order is in the book (Que). When they place a limit order in the market at a certain price, all the others that are in front of them in the market are executed first – at which point they can stand with level 2 data and with ATAS are tracked in real time. You can find a field of application e.g. HERE.
Some traders like to look at how many stocks/contracts are offered and how many are offered. This can indicate which side is more eager or powerful and can predict the short-term direction of the price. This tactic is combined with the observation of recent transactions. If most transactions take place at ask, it means that the price could fall in the short term, or the price could rise if most transactions were to take place at bid. This method can also be combined with chart-based strategies.
Level II is also known as the order book because it shows the orders placed waiting to be executed. An order runs when someone else is willing to trade at the same price. Level II is also known as Depth of Market because it shows the number of contracts available at each bid and bid price.
Availability and prices
Legal market data comes directly from this exchange or an official vendor (see list above) that offers the market you want to trade. For example, the New York Stock Exchange (NYSE) provides Level I and II for all NYSE-listed stocks and ETFs. Day traders receive market data through their brokerage or from the feed provider Direct. Levels I and II are available for futures and shares. Some Forex brokers also offer Level II market data, though not all. However, these only represent the order book and the volume of the respective broker.
Basically, Level II costs more than Level I. Some brokers can provide data feeds for free, but typically require higher commissions to compensate for them. Forex brokers offering Level II typically do not charge fees for it.
What is the cost of a data feed?
Exchange Fees + API Fees
What is the cost of a trade?
Routing fees + Broker Commission