Liquidity Depletion Rate

Quick Reference

Property	Value
Dimension	regime
Category	market_regime
Version	v0.9.0 (Beta)
Output Column	depletion_rate

Liquidity depletion rate - measures how quickly available liquidity is consumed by trading activity

Formula

-diff(order_book_depth, 1) / rolling_sum(trade_volume, window)

CDM Inputs

Column	CDM Table	Description
order_book_depth	cdm_*	CDM source table
trade_volume	cdm_*	CDM source table

Parameters

Parameter	Type	Default	Description
window	integer [2, 500]	10	Window size for depletion rate estimation

Output

Column: depletion_rate

Rate of liquidity depletion per unit of trading volume

Market Intuition & Trading Rationale

Liquidity depletion rate measures how fast depth is being consumed: -Δdepth / rolling_sum(volume, window). Each unit of trading volume consumes some fraction of the order book. A high depletion rate means volume is eating through depth quickly — the book is fragile. A low depletion rate means the book is absorbing volume with minimal depth reduction — the market is resilient. Negative depletion (depth increasing despite volume) indicates strong liquidity replenishment.

Usage Cases

• Execution capacity assessment: High depletion_rate → the book can't absorb much more volume. Split large orders or wait for replenishment. Low or negative → ample capacity, execute freely.
• Liquidity stress leading indicator: Rising depletion_rate precedes spread widening. When depth is consumed faster than it replenishes, liquidity providers eventually widen spreads. Monitor depletion_rate as an early warning.
• context: Core regime feature in liquidity_stress and related packs — depletion_rate captures the rate of liquidity deterioration, complementing the level measured by depth_imbalance and spread.

YAML Definition

name: liquidity_depletion_rate
description: Liquidity depletion rate - measures how quickly available liquidity is
  consumed by trading activity
category: market_regime
version: v0.9.0 (Beta)
dimension: regime
status: Pre-release
required_inputs:
  - order_book_depth
  - trade_volume
output_column: depletion_rate
output_description: Rate of liquidity depletion per unit of trading volume
parameters:
  window:
    type: integer
    description: Window size for depletion rate estimation
    required: false
    default: 10
    constraints:
      min: 2
      max: 500
formula: -diff(order_book_depth, 1) / rolling_sum(trade_volume, window)