Order-by-Order Depth Data for Identifying Worked VWAP Orders
Summary
The document compares order-by-order market depth with volume aggregated at each price level. Which format is available often depends on the exchange’s data dissemination rules, and venues differ in whether they publish individual orders, aggregated quantities, or participant identifiers. The choice therefore reflects both market access and the information a trading method needs.
Individual order records can reveal how a large execution is being worked, including whether incoming orders appear aggressive, neutral, or defensive. The answer gives predatory VWAP trading as an example of a strategy that can benefit from this detail: detecting a large VWAP order may help infer whether it is chasing short-term momentum or waiting for pullbacks. These observations are presented qualitatively, without a detailed algorithm, empirical results, or a discussion of false signals and market-specific constraints. The document does not establish that order-level data is always superior; its usefulness depends on the strategy and the exchange’s feed.
Key ideas
- Exchanges determine whether market depth is distributed order by order or aggregated by price level.
- Individual order data can help characterize whether trading activity is aggressive, neutral, or defensive.
- A predatory VWAP strategy may use order-level detail to detect large executions being worked in the market.
- Inferred execution behavior can suggest whether a participant is chasing momentum or waiting for pullbacks.
- The described use case is qualitative and provides no detailed algorithm or performance evidence.
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Full text
# Order book depth views preferences: order-by-order vs. total aggregated volume by price levels # Order book depth views preferences: order-by-order vs. total aggregated volume by price levels Which is best? Or is it irrelevant? Hi! Considering Level 2 Data (Market Depth), I want to understand the advantages to have all the order book on an order-by-order basis (or tick-by-tick basis) versus only have a total aggregated volume by price levels? Who are the principal users/traders of each method? Can you give me an example of a trading strategy using the order-by-order view? Do stock exchanges and vendors should provide Level 2 Data on an order-by-order view? Thank you very much in advance. Congrats for this very useful and interesting website! ## Answer by Matt Wolf (score 2) https://quant.stackexchange.com/a/8569 As someone pointed out, most times you do not have a choice because how the order book is disseminated heavily depends on the exchange. In Asia there are exchanges that even show the name of the counter party (though only aggregate volume not each order). Other exchanges provide a full "view", again others price level aggregates. Broadly speaking, some strategies benefit from being able to process each single order. One of such strategy would be a predatory VWAP algorithm (I have written some myself) which greatly benefit from information of each order. In combination with what I mentioned that some exchanges show counter party names/ids in aggregate volume from, such individual order information can be incredibly valuable. It is not one of the hardest exercises to quantitatively identify large VWAP orders that are "worked" in the market. Any individual order information is highly valuable in understanding whether they are aggressive, neutral, or defensive in their trading approach which in turn will give a lot of information about whether they most likely "chase" certain short-term momentum or wait to buy on expected pull-backs. Sorry but I am not able to pass on more detailed information but I think that should be detail enough to understand when order by order information can be put to use.
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