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When building a market maker that rests limits orders on both sides of the book, what microstructure effects should we be looking at to price those orders? I’m targeting liquid futures markets, and expecting to trade 1-3% of the daily volume.

Current effects that we find useful include the book imbalance (the ratio of volume on the best bid vs the volume on the best offer), and recent trades (someone removing liquidity on the bid is bearish).

What else might impact pricing, and related issues such as portfolio valuation?

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closed as off-topic by silencer, Louis Marascio, olaker Jan 29 at 8:24

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "Questions seeking assistance in developing a trading strategy are off-topic as they are unlikely to be useful to other readers." – silencer, Louis Marascio, olaker
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Hang on one second while I open up my little black book of valuable signals.... you do realize the question is a bit, ambitious, right? –  Louis Marascio Jan 28 at 22:56
    
I don't expect to hear anyone secret sauce, but I thought it might be possible to discuss some widely known effects, such as the ones I mentioned. For example, does the price moving away from VWAP have a microstructure effect? –  Ted Graham Jan 29 at 16:27
    
This is not a discussion forum. Questions asking for a "lists of things" are not a good fit for the Q&A format of this site. –  Joshua Ulrich Jan 29 at 22:45
    
@Ted: that's the problem of this forum, you'll hardly ever get any valuable information here because everybody keeps it for himself. That's why I think it will disappear at some point –  statquant Jan 29 at 23:19
    
@statquant: That's rather hypocritical coming from someone who has yet to share valuable information themselves. –  Joshua Ulrich Feb 4 at 12:08