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

Market visualization tools at the micro level

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

<aside> 💡 It is a fairly young section of quantitative finance that has begun to develop strongly as the trading process has become digitized and electronic trading platforms have emerged.

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Market microstructure examines how the distribution of information among market participants affects prices and transaction volumes.

Market microstructure also explores 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 a seller is willing to sell an asset and the price at which a buyer is willing to buy it. By analyzing these issues, market microstructure helps to 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 a rather labor-intensive and complex process due to the need to attract highly qualified personnel, access and storage of quotes of layer 3 and higher, the need to deploy high-performance and high-speed server infrastructure.

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

<aside> 💡 As a rule, microstructure products are the prerogative of institutional-level participants. They are not available to retail investors due to their high cost and complexity of implementation.

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The SpreadFighter trading and analytical platform allows access to developments in this area.