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I'm interested in CME futures, for example the SP500. And I wonder if the orderbook is just an aggregation of STOP and LIMIT orders?

For example the following fictive orderbook:

ASK:
20 Lots 5002.0
 8 Lots 5001.0
 2 Lots 5000.0
 
BID:
 1 Lots 4999.0
 9 Lots 4998.0
15 Lots 4997.0

Spread for 10 Lots: 3.0

If I open a BUY position of 10 Lots, the orderbook will be:

ASK:
20 Lots 5002.0
 
BID:
 1 Lots 4999.0
 9 Lots 4998.0
15 Lots 4997.0

Spread for 10 Lots: 4.0

If I want to wait the spread to come back to 3.0 for 10 Lots, it will need some market actors to place STOP or LIMIT SELL orders at 5000.0 or 5001.0, that will be aggregated in the ask part of the orderbook. Or to place STOP or LIMIT BUY orders at 5000.0 and 4999.0, that will be aggregated in the bid part of the orderbook.

I may be wrong, but if some market actors place some orders executed at market price, then they are immediately filled, and they will increase the spread, instead of making it decrease.

So I wonder how is computed the orderbook of CME futures? And if it is just the aggregation of STOP and LIMIT orders?

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    $\begingroup$ Yes, it is all from Limit and Stop orders, but there are a lot more Limit orders in the S&P500 futures book than in your example. And they are constantly being replenished (or cancelled) as time goes on. That's how the spread can stay small. At each price level, there is a queue (in time priority order) of limit orders, not just one order (usually). An average sized market order is not able to "take out" all the limit sells at that level, although a big order can of course. $\endgroup$
    – nbbo2
    Commented Mar 6 at 8:43
  • $\begingroup$ Ok, but does a trader have to close a position at the market price, or he can place a special close order that is filled or executed at a chosen price ? And does this special close order appears in the orderbook ? $\endgroup$
    – Bertrand125
    Commented Mar 6 at 9:32
  • $\begingroup$ (just curious what makes you think the futures order book is very different from stocks and requires "special close orders" and so forth. Which I have not heard before TBH). $\endgroup$
    – nbbo2
    Commented Mar 6 at 13:02
  • $\begingroup$ I was wondering if this type of order exists. I thought that sending a close order at a given price may be useful for a trader, and it would appear in the orderbook. So It seems close orders are always filled at the market price with some slippage due to order queue and to the execution time. $\endgroup$
    – Bertrand125
    Commented Mar 6 at 14:01
  • $\begingroup$ If you want guaranteed execution, you place a market order and take the ask price (for a buy). If you want to execute at a specific price, you place a limit order and hope that someone is willing to take your price. It's the same for futures, stocks, options, etc. $\endgroup$
    – D Stanley
    Commented Mar 6 at 16:23

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