Size clustering in the FTSE100 index futures market

Recent literature has begun to explore size clustering in financial markets. If a market is perfectly liquid, traders should be able to trade the exact amount that they desire; however, the presence of size clustering may prevent them from achieving optimal trade sizes. This study is novel in its investigation of size clustering in a futures market. We find that trade sizes cluster in a manner that is similar to the pattern of price clustering found in many financial markets. Importantly, we identify a trade‐off between size resolution and price resolution. We also find that the number of distinct trade sizes increases with trade frequency and with intra‐day volatility, and increases at the end of each calendar quarter. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:432–443, 2010