Market Microstructure
Confronting Many Viewpoints
By Mathieu Rosenbaum, Jean-Philippe Bouchaud, Charles-Albert Lehalle, Thierry Foucault, Frédéric Abergel
Publisher: Wiley
Final Release Date: April 2012
Pages: 416

Microstructure theory is a branch of economics that studies themechanisms of price formation on financial markets. Suchunderstanding is crucial in helping the regulators concerned withthe organization of liquidity in electronic markets and the issuesraised by high frequency trading. Thanks to the amount of availabledata and the development of high frequency trading, marketmicrostructure is now a mature practical field where precise,quantitative theories can be tested with accuracy. Quantitativeresearch of this kind has always been at the forefront ofinnovation and development in finance and the mechanism of priceformation is at the very heart of modern financialeconomics. 

Market Microstructure: Confronting Many Viewpointsexamines and compares different views on the nature of themechanisms ruling the behaviour of markets. Important topics suchas the interplay between liquidity taking and providing, thevarious types of market impact, the statistical tools specificallydesigned to handle high frequency data, or best-execution and otheralgorithmic trading strategies, are presented by renowned expertswho were invited speakers at the Market Microstructure, ConfrontingMany Viewpoints conference held in Paris, 6–10 December 2010.Their contributions shed new light on market microstructure as anobject for scientific study as well as a wealth of information forprice discovery and trading. 

Separated into four parts, Part One explores economicmicrostructure theory through algorithmic trading and order choiceand information in limit order markets. Part Two discusses highfrequency data modelling using quasi-likelihood analysis and limittheorems and looking at high frequency correlation results. PartThree then moves to market impact models and examines evidence fromNASDAQ ITCH data. Finally, Part Four concludes the book withoptimal trading and the role of transaction cost structure. Thisbook provides the latest research into market microstructure andfeatures contributions from some of the leading minds in the area,from academia, where the concepts have their origins, to marketpractice, where these ideas materialise.

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