Market Microstructure

Market microstructure refers to the study of how financial markets operate, focusing on the mechanisms and processes that facilitate trading, price formation, and liquidity. It examines the role of market participants, trading platforms, order types, and regulations in determining how efficiently markets function. Market microstructure analysis is essential for understanding the behavior of prices and the impact of trading activity on market dynamics.

Example

Market microstructure analysis might study how different order types, such as limit orders and market orders, affect price discovery and liquidity in the stock market.