Order-Book Depth and Execution Quality in Stock Perpetuals
Summary
The article explains why displayed bid and ask prices do not by themselves show whether a market can execute orders at those prices. Depth beyond the top of the book matters: larger orders may consume nearby liquidity and receive progressively worse prices, creating slippage and market impact. It describes measuring depth in bands around the mid-price, using 5, 10, and 50 basis points, and argues that volume alone does not reveal executable capacity at a given size.
It reports a platform-sponsored comparison of stock perpetual order books for Microsoft, Amazon, Apple, and Meta during a specific U.S. earnings-week observation period. The venue discussed ranked first across all twelve symbol-and-depth comparisons, with reported advantages over the next venue varying by band. These are time-bounded order-book observations, not a guarantee of execution quality or evidence of future performance. Depth can change as participants widen quotes or withdraw orders, especially during volatile events, and actual outcomes depend on market conditions and order size.
Key ideas
- Displayed quotes can misrepresent execution quality when little order-book depth sits behind them.
- Orders that exceed near-touch liquidity may walk the book and incur slippage.
- Depth measured at multiple distances from mid-price helps assess capacity for different order sizes.
- The article reports an earnings-week comparison across four stock perpetual contracts and three depth bands.
- A historical depth ranking may not predict future liquidity or a trader’s realized execution.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.