Market Liquidity And Depth On Floor-Traded And E-Mini Index Futures: An Analysis Of The S&P 500 And Nasdaq 100

[[abstract]]This paper aims to examine the market liquidity of regular futures and E-mini futures of CME. The bid-ask spread and market depth are explored to compare the market liquidity of floor-traded futures and electronically traded futures. The bid-ask model consists of a structural equation of bid-ask spread, trading-volume, and price-volatility. This paper finds that E-mini contracts boast superior market liquidity as measured both by bid-ask spread and market depth. This finding indi-cates that the automated trading market is more efficient in handling orders. Moreover, the mecha-nism of limited order books facilitates better transparency of information regarding trading prices and volume and the continuous bidding process helps to improve the reduction of liquidity cost