Extremely high Asks/Low Bids - L2

[danofthebes]

Ok - just started using L2 with Totalview. What is the purpose of the extremely high asks and extremely low bids that appear on L2. e.g. on a $5.00 stock there may be 10 or so one cent bids, generally, but not always for 100 shares. Conversely, there are 10 or so 100 share asks for $199,999.99. Are these some sort om MM code to other MMs, bookkeeping placeholders, or random information put out there to confuse the clueless like myself?

Thanks for any help.

 

[Rhody Trader]

Those types of bids and offers are usually seen when the primary session is closed in stocks which don't really trade after hours. It's just the market makers trying to avoid being picked off by some surprise action. I don't know the specific mechanics of the systems, but my guess is some indicative price must be shown at all times, so they put in prices which will never be hit.

 

[danofthebes]

Those types of bids and offers are usually seen when the primary session is closed in stocks which don't really trade after hours. It's just the market makers trying to avoid being picked off by some surprise action. I don't know the specific mechanics of the systems, but my guess is some indicative price must be shown at all times, so they put in prices which will never be hit.

Thanks....I was thinking it had to do with MM and their books, but I see it all daylong during regular trading hours. They even come and go like regular Bids/asks. Guess I'll have to ask a MM what the specific use is.

 

[foredog]

Another reason could be to catch fat finger trades, if someone means to offer 100000 of something at $5.01 but accidentally puts it in at market then it will fill all the way down and you get you stock at a massive discount. doesn't happen often but quite nice when it does!