Low-Quality Liquidity describes market depth that appears substantial but lacks genuine availability or reliability for executing trades without significant price deviation. This condition often stems from transient order book entries or manipulative trading practices.
Mechanism
Low-quality liquidity manifests through wide bid-ask spreads, shallow order books that evaporate upon interaction, or the presence of spoofing and wash trading activities. Such market conditions impede efficient order fulfillment, leading to elevated trading costs and heightened execution risk for market participants.
Methodology
Identifying and circumventing low-quality liquidity involves deploying advanced market surveillance systems and intelligent order routing algorithms that analyze order book stability, historical execution rates, and the behavior of liquidity providers. Utilizing Request for Quote (RFQ) systems can also secure firm, executable quotes, bypassing unreliable public order books.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
