Market microstructure studies how the rules and mechanics of trading, such as order types, matching and information flow, shape prices, liquidity and transaction costs.
Semantic Classification
Content
- Market microstructure examines how order books, matching rules and the arrival of information determine bid-ask spreads, depth and price impact. It explains how liquidity provision and adverse selection translate into trading costs.
- The field informs the design of both traditional exchanges and on-chain venues, where automated market makers replace the order book. It connects exchange design to prediction market and decentralised trading mechanisms.