L1 Market Data
L1 (Level 1) market data represents the most basic and essential real-time market information, consisting of the best bid and ask prices (BBO), last trade price, and associated volumes for a financial instrument. It forms the foundation of market data services and is crucial for basic price discovery and trading decisions.
Understanding L1 market data
L1 data provides the fundamental building blocks of market information:
- Best bid price and size
- Best ask price and size
- Last trade price and size
- Trading status
- Daily statistics (high, low, volume)
This data represents the most condensed view of market activity and is essential for:
- Basic price discovery
- Trading decisions
- Market monitoring
- Simple trading algorithms
Market data hierarchy
L1 sits at the base of the market data hierarchy:
Importance in trading systems
L1 data serves several critical functions in modern trading systems:
Price discovery
L1 provides the most efficient way to monitor current market prices across multiple instruments. The bid-ask spread calculated from L1 data is a fundamental measure of trading costs and market efficiency.
Market quality monitoring
Trading venues and market makers use L1 data to track basic market quality metrics and ensure orderly trading conditions.
Feed handler optimization
L1 feeds typically require less processing compared to L2 or L3 data, making them ideal for applications where minimal latency is critical.
Next generation time-series database
QuestDB is an open-source time-series database optimized for market and heavy industry data. Built from scratch in Java and C++, it offers high-throughput ingestion and fast SQL queries with time-series extensions.
Business applications
Trading systems
- Price validation for order entry
- Basic algorithmic trading signals
- Market making systems
- Risk management checks
Market surveillance
- Quote monitoring
- Trading pattern analysis
- Basic market manipulation detection
Analytics
- Time-weighted average price (TWAP) calculations
- Basic transaction cost analysis
- Market quality metrics
Performance considerations
L1 data requires specific handling for optimal performance:
Throughput characteristics
- Lower bandwidth requirements compared to L2/L3
- Higher update frequencies for liquid instruments
- Predictable message sizes
Latency requirements
- Critical for market making and arbitrage
- Typical processing targets in microseconds
- Important for tick-to-trade latency calculations
Implementation best practices
When working with L1 data:
- Implement efficient update mechanisms
- Use appropriate timestamp resolution
- Consider message coalescing for high-update securities
- Maintain redundant feeds for reliability
- Monitor feed gaps and latency
Market data distribution
L1 data is typically distributed through:
- Proprietary exchange feeds
- Market data vendor services
- Securities Information Processor (SIP) feeds
- Direct exchange connections
The choice of distribution method often depends on:
- Latency requirements
- Cost considerations
- Geographic location
- Regulatory requirements