Guys, here's a wikipedia link wrt market microstructure --
Market microstructure - Wikipedia, the free encyclopedia.
Also, market microstructure is pretty relevant to algorithmic trading -- for instance, we have a client right now that is wanting to hire someone to work on coming up with trading strategies and implementing trading strategies, and they are pretty keen on individuals that understand market microstructure.
thanks for sharing your view sameer.
And I think the wiki definition is pretty good:
Microstructure deals with issues of market structure and design, price formation and price discovery, transaction and timing cost, information and disclosure, and market maker and investor behavior.
Market structure and design
This factor focuses on the relationship between price determination and trading rules. In some markets, for instance, assets are traded through dealers who keep an inventory (e.g., new cars), while other markets are dominated by brokers who act as intermediaries (e.g. housing). One of the important questions in microstructure research is how market structure affects trading costs and whether one structure is more efficient than another.
Price formation and discovery
This factor focuses on the process by which the price for an asset is determined. For example, in some markets prices are formed through an auction process (e.g. eBay), in other markets prices are negotiated (e.g., new cars) or simply posted (e.g. local supermarket) and buyers can choose to buy or not.
Transaction cost and timing cost
This factor focuses on transaction cost and timing cost and the impact of transaction cost on investment returns and execution methods. Transaction costs include order processing costs, adverse selection costs, inventory holding costs, and monopoly power.
Information and disclosure
This factor focuses on the market information and transparency and the impact of the information on the behavior of the market participants.
