A condition that describes the ability to execute orders of any size quickly and efficiently without a substantial affect on the price. Liquidity can be described in terms of volume and open interest (abbr. OI). Each unit of volume represents a complete transaction. When one… Read More »Liquidity
During the specified period of the trading session (American, Asian-Pacific, European), the market makers must continuously maintain two-way futures quotes, observing the minimum volume of own orders agreed with the exchange and the spread between bid-ask quotes (widening of spread for periods of increased volatility… Read More »Role and Capabilities of a Market Maker
To understand the capabilities of market makers, one should know the limited market depth available to any participant: 1) Data featuring the nearest (best) placed 10 bid and 10 ask limit orders shows the price and number of contracts (Level 2). 2) Data featuring each… Read More »Capabilities of Market Makers
Instead of creating liquidity, by definition of CME Group, a market maker earns the spread (Chapter 1.3), but earning the bid-ask spread is only possible with the same volume of ask and bid transactions at a constant price; the limitation of the specified length of… Read More »Why Does Price Change Occur?