Depth and Spreads in Futures Markets: Relationship With Limit Order Submissions

21 Pages Posted: 7 Jan 2019

See all articles by Alex Frino

Alex Frino

University of Wollongong

Ognjen Kovacevic

Macquarie University

Vito Mollica

Macquarie Graduate School of Management; Capital Markets CRC Limited (CMCRC); Macquarie University, Macquarie Business School

Date Written: January 15, 2018

Abstract

This paper examines how limit order submissions affect liquidity measures, in light of queuing order and waiting cost theory. We find empirical support of an adverse impact of higher number of submissions on liquidity due to lengthening of the queue. This leads to wider spreads and less depth at best quotes. Executions reduce the average waiting times and lead to lower charges in terms of bid-ask spread and higher liquidity immediately available for trade at best quotes. We find evidence of cancellations having similar impact as executions – narrowing the spreads and increasing depth volumes available at best quotes.

Suggested Citation

Frino, Alex and Kovacevic, Ognjen and Mollica, Vito, Depth and Spreads in Futures Markets: Relationship With Limit Order Submissions (January 15, 2018). Available at SSRN: https://ssrn.com/abstract=3305947

Alex Frino

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Ognjen Kovacevic (Contact Author)

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia
416232607 (Phone)

Vito Mollica

Macquarie Graduate School of Management ( email )

Capital Markets CRC Limited (CMCRC) ( email )

Level 3, 55 Harrington Street
Sydney, 2000
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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