Finding Depth to Inform Markets of the Future


what it means to the retail investors

The "rise of retail" was a moniker that emerged during pandemic to describe the unprecedented entrance of new retail participants into the stock market. In January 2021, approximately 6 million people downloaded trading apps in the U.S.¹ , which contributed to record-high average daily volumes for equity and options trades. At multiple times during 2021, retail investors made up one-third of all U.S. stock market trading². Interestingly, the rise of retail phenomena is a global trend, with an oversized impact across the APAC region.

Many retail investors trade through online brokerage firms, and more than ever, firms require access to data and insights that satisfy their retail clients’ appetite for information. Nasdaq TotalView, which is a depth data product for traders, displays the full order book depth on Nasdaq. It shows every quote and order at every price level in Nasdaq, New York Stock Exchange (NYSE) and regional-listed securities on Nasdaq. In addition, Nasdaq TotalView disseminates the Net Order Imbalance Indicator (NOII) for the Nasdaq opening and closing crosses and Nasdaq initial public offering (IPO)/halt cross.

It is important for investors to know that any stock can trade on any exchange in the U.S. Nasdaq is the leading exchange in the U.S. and has the largest single pool of on-exchange liquidity measured by volume market share, averaging over 15.7%. This is double the size of NYSE ARCA at 8.8%³.

The National Best Bid and Offer (NBBO) is an extremely important piece of market data because it is the highest bid and lowest ask price for a security across all trading venues, but this measure only captures round lot orders.

Depth-of-book data refers to the robustness of an order book, which is a record of buy and sell orders that are waiting to be placed. Nasdaq TotalView can capture bids and offers for odd lot orders not reflected in the NBBO, which improves depth-of-book data because this provides a more complete perspective on supply and demand.

Recent research has found that odd lots or order data inside the best bid and offer has predictive power when forecasting future price movements⁴, which suggests that these granular details allow for more competitive trading without cutting into already narrow margins.

Imagine that the price of a stock is falling, and there is a buy order in the order book for 10,000 shares that is below the current share price. That large order could serve as a price floor.

Three separate measures of price formation help investors understand depth-of-book data and the quality of the data feed they receive.

• Inside the NBBO

• Within 1% of the NBBO

• Within 10% of the NBBO

In all these measures, the price formation for these prices are contributed mainly from Nasdaq market depth.

Another reason why depth-of-book data is important is because liquidity on exchanges is generally provided by market participants such as banks and broker-dealers, market makers, hedge funds, asset managers, retail investors and corporates. These entities typically route their orders to the exchange that shows the best depth of liquidity because that is where they can achieve best execution.

The Nasdaq opening and closing cross are the price discovery facilities that cross orders at a single auction price. The NOII gives auction participants an early look at the supply and demand for a stock prior to the opening and closing crosses, and the analysis of order imbalances allows participants to be better prepared to offset liquidity demands.

Nasdaq strives to provide fair executions for investors through a process that creates a single price for IPOs based on supply and demand. In addition, the IPO indicator shows details of all orders for an IPO during the pre-IPO quoting period and the number of shares and orders that would execute if the cross were to occur. While retail investors may or may not participate directly in the IPO crosses, they can gain insight into the opening price of the IPO once it starts trading in the regular market.

The combination of depth of book, NOII and IPO cross data has huge potential to empower investors to make more informed trading decisions and achieve their investment goals.

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Source: The rise of newly empowered retail investors, Deloitte (

Source: The rise of retail investing, United Fintech (

Source: U.S. equities market volume summary on for trade data on 1 July 2022.

Source: The Market Inside the Market: Odd-Lot Quotes written by Robert P. Bartlett, Justin McCrary & Maureen O'ara from SSRN papers