A section of quantitative finance that studies the impact of the behavior of market participants, volatility, orderflow intensity, liquidity, spreads, trading volumes and other market data parameters on prices

Micro-level market visualization tools

Market microstructure is a field of finance that studies the process of price formation in financial markets and the interaction between participants of these markets at a micro level. It analyzes how participants make decisions about buying and selling financial assets, including stocks, bonds, derivative derivatives, cryptocurrency, and others.

<aside> 💡 This is a relatively young section of quantitative finance, which began to actively develop as the process of trading digitized and electronic trading platforms emerged.

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In the context of market microstructure, it is explored how the distribution of information among market participants affects prices and transaction volumes.

Market microstructure also investigates issues of liquidity and spreads. Liquidity is the ability to sell an asset quickly and at a fair price without significantly affecting the price itself. Spread is the difference between the price at which the seller is willing to sell the asset, and the price at which the buyer is willing to buy it. By analyzing these issues, market microstructure helps understand how market participants interact and what factors influence prices and transaction volumes.

Research and development of algorithmic, trading, and analytical solutions in this area is rather labour-intensive and complex due to the need to attract highly qualified personnel, access and storage of layer 3 and higher quotes, the need to deploy high-performance and high-speed server infrastructure.

However, it is precisely solutions in this area that allow traders and investors to gain a market advantage, more attractive prices for executing their orders, reduce risks and increase profits.

<aside> 💡 As a rule, microstructure products are the prerogative of institutional-level participants. They are inaccessible to retail investors due to their costliness and complexity of implementation.

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The SpreadFighter platform provides access to developments in this field.