EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/2.III.3:2.III.3 Depth

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/2.III.3

2.III.3 Depth

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

A third variable of pre-trade data is its depth. Two things should be distinguished here, namely: (1) depth of book and (2) depth of trading interest at the prices advertised. ‘Depth of book’ refers to which extent orders are visible, for example, only the best bid (ask price) and offer (sell price) or additional information, such as the orders below the best bid/offer.1 ‘Depth of trading interest at the prices advertised’ refers to the size (volume) in which potential prices are offered. In EU regulation, ‘depth’ often refers to the latter, namely the size attached to the price of a potential trade.2 Pre-trade data can be divided in three different types of depth:

a)

The Best Bid and Offer (BBO), which is also referred to as Level 1 data, entails the best bid and best offer available on a venue (depth of book).3 Consequently, the depth attached to the sizes of the potential prices is limited to the volumes of the best bid and best offer only.

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Source: DeGiro. Example of a BBO (Level 1), that is – the best bid and offer, including the attached size (depth), in a given financial instrument (e.g. A2A as traded on the Borsa Italiana).4

b)

Besides the BBO, a venue can also display the partial order book, being so-called Level 2 data. A partial order book covers pre-trade data beyond the best bid and offer (depth of book). An example of a partial order book constitutes the situation where a venue (e.g. an RM) makes available the five best bid and offers, including the size (volume attached to the bids and offers).5

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Source: DeGiro. Example of a partial order book (Level 2), which in this case includes the ten best bids and offers, including the attached size (depth), for a given financial instrument (e.g. Adyen as traded on Euronext Amsterdam).6

c)

Pre-trade data can also be made available in the form of a full order book (Level 2+) (depth of book). A full order book provides all bids and offers, including the size attached to the orders, on a given venue (volume attached to the bids and offers).7

Deze functie is alleen te gebruiken als je bent ingelogd.