Trading patience, order flows and liquidity in an index futures market

This study investigates the limit order book characteristics and the intertwined dynamics between trading patience, order flows, and liquidity in an index futures market. The limit order book displays a hump shape and the steepness of the hump is positively related to the number of large market orders. Bid and ask prices tend to move together in the same direction. Moreover, higher proportion of patient traders and higher order arrival rate lead to higher liquidity, after controlling for volatility and the intraday time effect. Liquidity is found to have a feedback effect on trading patience and the order arrival rate. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 34:731–756, 2014