Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. Join them; it only takes a minute:

Sign up
Here's how it works:
  1. Anybody can ask a question
  2. Anybody can answer
  3. The best answers are voted up and rise to the top

Are there any sure-fire ways to increase market-depth that people have experience with?

Has much research been done/published on this subject?

share|improve this question
We need a bit of background here. What's your standpoint? Are you a broker? Are you an investor? – SRKX Aug 26 '13 at 17:54

Two general methods: you either need to increase general interest in the asset (i.e. increase volume) or make a mechanical change that will induce depth. Some obvious ways:

  • Increase the minimum spread so that depth increases at the inside (you see this effect in low price stocks, where the minimum tick size is a constraint).
  • Incentivize liquidity provision (e.g. maker taker model).
  • Change the matching algorithm, for instance, to pro-rata as it is in short-term interest rate futures.

Some of these changes may result in higher t-costs for liquidity takers, as they primarily provide incentives to middle-men (dealers, high-frequency traders).

share|improve this answer
Wow, you're back! – chrisaycock Aug 27 '13 at 3:57

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.