An Empirical Study Of Limit Order Book

Using the limit order book(LOB) data for E-mini S&P500 Futures, the almost continuous full history of LOB over random-selected four months was constructed. With this unique dataset, we focus on examining the two dimensional information---price and volume--- in the following three ways. 1) Using the quotes in the book, simple constraint regression modeling might retrieve some kind of efficient underlying price, which is close to a semi-martingale. 2)A newly proposed liquidity measure based on the book volume and price information could be a good complement to the existing family of liquidity measures. 3) We firstly analyzed the possibility of spoofing orders in the U.S. index Futures from the perspective of the limit order book. We found that the possibility of the spoofing in E-mini S&P500 Futures might be high in terms of the frequency of the time intervals with an extreme order imbalance and with desired price changes at the end of interval and subsequent time. Since the spoofing is illegal market behavior, this result may induce more attention from regulators. Also, the trading strategy inspired by the insight from the spoofing study seems to provide a new way to find the timing to enter a position. The strategy could be profitable.