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Level 3 Data

Level 3 data is the most detailed and granular type of market data available, offering full order book transparency with participant-level information.
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Level 3 data is the most detailed and granular type of market data available, offering full order book transparency with participant-level information. It provides complete visibility of the order book by identifying individual orders and the market participants, such as traders or firms, in real time.

This surpasses Level 2 data by displaying price levels and aggregate volumes. Additionally, it reveals the exact price, size, and timestamp of each order, along with the participant placing it.

Level 2 data provides valuable insights by showing price levels and the total volume of orders at each level. It often aggregates this information, sometimes disclosing the number of orders or exchange IDs. In contrast, Level 3 data delves deeper by listing each order. It includes the precise price, size, timestamp, and identifies the market participant responsible for each order. This enhanced transparency allows for a more comprehensive reconstruction of the entire limit order book and facilitates detailed tracking of order flow on a per-participant basis.

Level 3 data encompasses several key features that provide exhaustive market insights:

  • Individual Orders: Each order is listed separately rather than being aggregated by price level.
  • Detailed Order Information: Includes the exact price, size, and timestamp of every order.
  • Participant Identification: Reveals the identity or code of the market participant placing each order.
  • Real-Time Updates: Provides instantaneous updates as orders are placed, modified, canceled, or executed.

These features enable users to reconstruct the complete limit order book, monitor the sequence of events leading to trades, and gain unparalleled visibility into market dynamics.

Level 3 data is primarily utilized by entities that require deep market insights and rapid data processing capabilities. The main users include:

  • Exchanges and Clearinghouses: For managing and overseeing market operations effectively.
  • High-Frequency Trading (HFT) Firms: These firms co-locate servers to process Level 3 data with microsecond latency, enabling ultra-low-latency algorithmic trading.
  • Market Makers: They need full visibility into the order book to manage their quotes and associated risks accurately.
  • Regulators: For conducting real-time market surveillance and performing audit functions to ensure market integrity.

Due to its complexity and depth, Level 3 data is not typically accessible to the general public or most retail traders.

Level 3 data is instrumental in several advanced financial applications:

  • Ultra-Low-Latency Algorithmic Trading: Enables the development and execution of trading algorithms that can react to market changes in microseconds.
  • Real-Time Market Surveillance: Assists regulators and exchanges in monitoring trading activities, detecting anomalies, and maintaining market fairness.
  • Exchange Infrastructure Development: Facilitates the enhancement of exchange systems by providing detailed data feeds necessary for optimizing order matching and execution processes.

The depth and immediacy of Level 3 data empower users to make informed decisions, optimize trading strategies, and maintain robust market operations.

Access to Level 3 data is generally restricted to institutional participants due to its complexity and the advanced technical infrastructure required to process it. Typically, it is available to:

  • Market Makers and HFT Firms: Who invest in high-speed data processing systems to leverage the detailed information.
  • Exchanges and Clearinghouses: Which utilize the data internally for order matching and reporting executions.
  • Regulatory Bodies: For purposes of market oversight and ensuring compliance with trading regulations.

Unlike Level 1 and Level 2 data, Level 3 data is not offered through standard APIs or public feeds. It is a specialized resource reserved for entities that can fully utilize its comprehensive insights.

Beyond financial markets, Level 3 data also applies to large-scale business-to-business transactions. For merchants qualifying for Level 2, Level 3 data includes all the information from Levels 1 and 2. It is supplemented with additional details such as commodity and product codes, quantities, item descriptions, shipping and freight information, and units of measure.

This granular data facilitates more accurate billing, inventory management, and logistical planning, enhancing operational efficiency for businesses engaged in complex transactions.

  • Highest Market Data Granularity: Level 3 data provides the most detailed and granular information available in financial markets, including individual orders and the identities of market participants. This level of detail surpasses other data levels, offering unparalleled visibility into market dynamics.
  • Enhanced Transparency Compared to Level 2: Unlike Level 2 data, which aggregates order information, Level 3 data lists each order with precise price, size, timestamp, and participant details. This allows for a more comprehensive reconstruction of the entire limit order book and detailed tracking of order flow.
  • Key Users: Level 3 data is primarily utilized by exchanges, high-frequency trading firms, market makers, and regulatory bodies. These users require deep market insights and the ability to process data rapidly to inform their trading strategies, market oversight, and operational functions.
  • Restricted Access and Specialized Use: Access to Level 3 data is typically limited to institutional participants due to its complexity and the advanced technical infrastructure required to process it effectively. Unlike more accessible data levels, Level 3 data is not generally available to the public or retail traders.