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What Is a ‘Level 2’ Order Book and Why Is It Important for Market Makers?

It shows bids and asks beyond the best price, crucial for market makers to estimate slippage and price large options/hedges accurately.
Greeks.Live14.11.25

What Is a ‘Level 2’ Order Book and Why Is It Important for Market Makers?

A 'level 2' order book provides visibility into the bids and asks beyond the best available price (the top-of-book). It shows the depth of liquidity at various price levels.

This information is crucial for market makers to estimate potential slippage and market impact for large trades, allowing them to price options and hedges accurately.

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