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The quotes are grouped by color to indicate price levels. Importantly, we see the size of the bids and offers expressed in hundreds of shares (e.g., 30 means 3,000 shares). |
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In this example, these are exchange quotesthe bids and the asks from the various exchanges that quote IBM: the New York Stock Exchange (NYSE), Nasdaq (NASD), Pacific (PACF), Philadelphia (PHLX), Chicago Mercantile (CMSE), Cincinnati (CINX), and Boston (BOSX). |
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This window gives us useful information about the current price for IBM, but it omits one very important piece of information: the level of support below the prices listed on each exchange. This is particularly important for NYSE quotes because so much of the liquidity in these listed stocks in on the NYSE. |
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For example, we see that NYSE is bidding 3,000 shares of IBM at 119 5/16, and offering 1,000 shares of IBM at 119 9/16. |
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Would you want to buy IBM right now at 119 9/16 if you knew that the IBM specialist on the NYSE had offers to sell another 75,000 shares at 119 5/8? Don't you see how this selling pressure would act to keep the price from rising very far? |
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Would you like to buy IBM right now at 119 9/16 if you knew that the specialist had no other offers to sell IBM, but did have offers to buy another 75,000 shares at 1191/2? Don't you see how this buying interest could help to drive the price up? |
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Without seeing the depth of the market, you are missing valuable clues to the future direction of a stock's price that can affect the timing of our orders. |
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For exchange listed stocks, that information is simply not available. The specialist keeps that information to himself. |
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On the Nasdaq, it is a different story. You can see the depth of the market through a service called Nasdaq Level II, which shows price quotes from every market maker and ECN trading a stock. Level II takes you to the very pricing soul of your selected stock! |
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Figure 11.2 shows what Nasdaq Level II looks like: |
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