In Financial Derivatives, What Is the Equivalent of a “Transaction Backlog” in the Mempool?
In financial derivatives, the equivalent of a "transaction backlog" in the mempool is a large, pending order book or a liquidity crunch in a thinly traded market. A large order book with many limit orders far from the market price represents a queue of desired transactions that are "stuck".
A liquidity crunch means there are few willing buyers and sellers, leading to delayed execution and wider bid-ask spreads, analogous to a congested network where transactions take longer to confirm.
Glossar
Liquidity Crunch
Scarcity ⎊ A sudden decrease in the availability of cash or liquid assets can lead to significant disruptions in the financial markets.
Pending Order Book
Depth ⎊ A pending order book represents a consolidated list of buy and sell orders for a specific asset, organized by price level, revealing market participants’ intentions and potential liquidity points.
Limit Orders
Execution ⎊ Limit orders, within cryptocurrency, options, and derivatives markets, represent instructions to buy or sell an asset at a specified price, or better, contingent upon market conditions.