A futures liquidity filter for equal-dollar execution

A pre-trade screen for executable books

This archive workflow applies futures contract selection only after a liquidity filter has ranked listed markets by how executable they are. The filter is a pre-trade screen that keeps only contracts whose activity, depth, and implementation cost support an executable order over the life of that order.

Open interest analysis supplies the stock of outstanding futures as a size input when judging how readily a contract can be entered and exited. That stock is read together with a volume factor and an equal-dollar lot count, not as a stand-alone reason to hold one market over another.

Scale each market with an equal-dollar lot count

An equal-dollar overlay multiplies contract value by the largest price change seen in the prior three years so each listed market is scaled to a comparable profit unit. That largest move is the three-year price excursion: the largest price move observed in a trailing three-year window, used to put different contracts on an equal-dollar footing.

The equal-dollar lot count equals tick dollar value times the three-year maximum price excursion. It states how many contracts of one futures market are required to match another market's three-year dollar price swing.

Rank relative contract liquidity

Relative contract liquidity is defined as the equal-dollar lot count times total open interest times a volume factor. A futures liquidity rank can also be formed by multiplying point value, a three-year extreme price move, open interest, and a volume scalar usually set between 1 and 4.

The volume factor is an activity scalar, typically between 1 and 4, that adjusts a liquidity rank for unusually thin or extremely heavy volume. In the archive construction, the volume factor is the greater of 1 and the exponential of the natural log of volume divided by the natural log of 5000, minus 2.

The ranking places contracts that are easier to buy and sell above those that are harder to transact. It is a cross-market rank of how easily a futures book can be traded, built from the equal-dollar lot count, open interest, and the volume adjustment.

Read thin marks and other columns in place

Markets marked with one activity dot or none are treated as thinly traded and therefore less suitable for speculative execution.

Each column in the comparison is a proportional statistic and is meaningful only against other markets in the same column. Effective percent margin is one of those columns: posted margin in dollars divided by the contract's three-year dollar range, then multiplied by 100, so margin use can be compared across markets.

For listed shares, period volume divided by shares outstanding is presented as a turnover-rate proxy for trading liquidity.