When Quotes Crumble: Detecting Transient Mechanical Liquidity Erosion in Limit Order Books

This research introduces a method for detecting transient liquidity erosion ("crumbling quotes") in electronic limit order books, differentiating between mechanical liquidity withdrawal and informational repricing. Using an ABIDES multi-agent simulator for ground truth, a neural model is developed that significantly outperforms rule-based baselines in identifying crumbling events across diverse market conditions.