Written by Patricia Skinner
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Three Levels of NASDAQ

Stock traders following NASDAQ developments have access to three levels of information on the market's activities. Day-to-day information is known as NASDAQ Level I. NASDAQ Level II opens up a whole new area of data and analysis. Level III NASDAQ also exists, but for the moment is only accessible to market makers.

In Theory

Theoretically, NASDAQ stocks should be more reliable to trade because there is no exchange to close when things get bad. Back in 1987 though, when the NASDAQ corrected 11.35% on what became known as Black Monday, October 19, many market makers declined to trade their stocks, even though in theory they were required to do so. So the point that the NASDAQ is always willing to make a market, unlike the NYSE which often halts trading in a volatile stock, isn't necessarily so. It has been said that when the market hits the wall, all bets are off.

Level II Is Vital to Traders

Level II NASDAQ gives all bids and all offers and the actual size of those offers in every stock for every market in a particular stock. It was designed for brokers and dealers to be able to gauge the direction of the market and anticipate developments. In the past few years, Level II information has become available to the general public so anyone who deals in the stock market can take advantage of it.

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