What is a Level III Quote?
A level III quote is pricing information made available to registered Nasdaq market makers.
How Does a Level III Quote Work?
A level III quote for Company XYZ stock would include the real-time bid price, ask price, quote size, price of the last trade, size of the last trade, high price for the day and low price for the day. It would also include a ranked list of the real-time best bid and ask prices from participating market makers, who are identified via a four-letter abbreviation.
Level III quotes come from the securities dealers that make up the market. Level III quotes are restricted to registered Nasdaq market makers.
Why Does a Level III Quote Matter?
Level III quotes are the vortex of the trading system because they allow users to directly execute trades. For this reason, level III quotes are generally only available on trading floors at brokerage firms of registered Nasdaq market makers.
A level III quote allows a market maker to change its bids, offers, and order sizes for securities in which it makes a market, as well as execute orders, change quotes, and send out trade confirmations.