How Limit and Stop Orders Shape a Futures Order Book

Summary

The question asks whether a CME futures order book consists of aggregated stop and limit orders, using a hypothetical book to illustrate how consuming displayed offers can change the cost of executing a buy order. It also asks how the spread could narrow again if market orders are filled immediately.

The document contains the question and example but no answer explaining order-book mechanics. It therefore offers a useful prompt about displayed liquidity, market depth, and execution impact, while leaving the central issue unresolved. In particular, it does not establish which order types contribute to the visible book, how stop orders are handled before triggering, or what market participants’ activity would do to the spread. Readers should treat the example as a question, not as a complete description of CME futures markets.

Key ideas

• The example shows how buying against displayed offers can reduce available ask depth.
• A change in available depth can alter the estimated cost of executing a given size.
• The document asks whether stop and limit orders make up the visible futures book but does not answer.
• It provides no evidence about how CME handles untriggered stop orders or how spreads recover.

Tags

# Futures: how is the orderbook computed?


# Futures: how is the orderbook computed?












I'm interested in CME futures, for example the SP500. And I wonder if the orderbook is just an aggregation of STOP and LIMIT orders?

For example the following fictive orderbook:

```
ASK:
20 Lots 5002.0
 8 Lots 5001.0
 2 Lots 5000.0
 
BID:
 1 Lots 4999.0
 9 Lots 4998.0
15 Lots 4997.0

Spread for 10 Lots: 3.0
```

If I open a BUY position of 10 Lots, the orderbook will be:

```
ASK:
20 Lots 5002.0
 
BID:
 1 Lots 4999.0
 9 Lots 4998.0
15 Lots 4997.0

Spread for 10 Lots: 4.0
```

If I want to wait the spread to come back to 3.0 for 10 Lots, it will need some market actors to place STOP or LIMIT SELL orders at 5000.0 or 5001.0, that will be aggregated in the ask part of the orderbook. Or to place STOP or LIMIT BUY orders at 5000.0 and 4999.0, that will be aggregated in the bid part of the orderbook.

I may be wrong, but if some market actors place some orders executed at market price, then they are immediately filled, and they will increase the spread, instead of making it decrease.

So I wonder how is computed the orderbook of CME futures? And if it is just the aggregation of STOP and LIMIT orders?

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.