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Liquidity in Select Futures Markets ∗

Recently, a number of concerns about decreasing market liquidity in various financial markets have been expressed by market participants and academics. In order to better understand trends in liquidity within U.S. derivatives markets, we make use of trade and orderbook audit trail data for three active futures products (S&P E-mini, Ten Year Treasuries and WTI Crude Oil) from 2013 through mid-2016. We calculate multiple liquidity measures for each of these products, including bid-ask spreads, orderbook depth, and other metrics related to trading costs and execution quality. Trends for a few of these liquidity measures signal a potential increase in trading costs over the last few years such as reduced trade sizes and, in cases, lower orderbook depth, especially for the E-mini contract; often these reductions coincide with periods of increased market volatility. In contrast, trade volumes have increased for WTI Crude Oil and price impacts have decreased over the same time frame. Most common are trends that indicate little change in liquidity levels over the analyzed time period: the average number of participants, average number of market-makers, and the level of liquidity provision for the major trader groups has remained range bound across multiple years. The balance of our overall findings indicate that costs for market participants, and the prevalence and concentration of market-markets, has not changed significantly over recent years. More generally, this paper highlights a set of measures that can be utilized on an ongoing basis for futures liquidity monitoring.