What is Depth-within-X?

Depth-within-X bps measures how much you can execute without moving the price more than a chosen basis-point threshold from a reference, often the mid. It summarizes immediate capacity across both sides for a given tolerance.

The metric helps translate liquidity into practical sizing guidance.

Parameterization

Key choices include the basis-point radius, the reference (mid, arrival, composite), and whether to include hidden or conditional liquidity. For fragmented assets, a consolidated view avoids venue-selection bias.

Parameters should align with the strategy’s tolerance for impact and urgency.

Sizing and slippage planning

Traders map order notional to expected slippage using depth-within-bps and recent refill behavior. If desired size exceeds capacity, they adjust schedules, widen the time window, or use passive tactics to earn spread while waiting for replenishment.

Risk managers set limits that throttle aggressiveness when capacity thins.

Venue comparability

Comparing venues on this metric reveals where larger slices can clear with less impact. Combined with spread normalization time and quote stability, it informs routing priorities.

Care is needed during regime shifts when capacity changes quickly and historical profiles become stale.

Things to Remember

• Make it task-specific: Choose X bps to match urgency and risk tolerance.
• Consolidate fairly: Use composite books to avoid overstating capacity.
• Link to schedules: Map size to predicted slippage and adapt tactics.
• Recalibrate often: Capacity is regime-dependent; update parameters regularly.