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Market Microstructure Theory Maureen O'Hara
Publisher: Wiley

The ontology of a non-market-system is confronted with the basic methodology of economics, which is based upon profit maximization and market selection. SPULBER, DF (1996) Market Microstructure and Intermediation. In a research paper by Reginald Smith of the Bouchet Franklin Institute in Rochester titled "Is high-frequency trading inducing changes in market microstructure and dynamics? Pretty much any analysis on how change in trading rules will affect market participants carried out using GT apparatus. What is most troubling, is that micro similarities, as postulated by non-linear theory, tend to rapidly evolve into massively scaled topological disturbances, and thus a few simple resonant trades can rapidly avalanche into a major market destabilizing event. Throughout the book examples from empirical studies bridge the gap between the theory and practice of trading. Game Theory applies more or less sucessfully to market microstructure. It is concerned with (1) market structure and design, (2) price formation and discovery, and (3) liquidity and transaction costs. In general, market microstructure theory might be defined as “the study of the process and outcomes of exchanging assets under explicit rules” (Easley and O'Hara, 1995; p. [list][*]An introduction to the different types of execution is followed by a review of market microstructure theory.