Question

Market microstructure and high frequency trading

Explain at least two influential themes in market microstructure and high frequency data/trading. Your answer should use examples from relevant literature and practice.

Answer 1

Solution :-

As we all know that in these days a various numbers of financial instruments are traded in the market , electronic market. and there are various alternatives of it that are used in the past the example of it was open outcry . And we all knoow that here the stock exchanges are now turned to computers that are very most reliable. Therefore there is a proper microstructure of this type electronic market. Which works as a key when there is a nedd to understand that how the trading of high frequency or we say large volume works.

Market in these days are different from fundamentally The high trading frequenncy made the things very faster clearly but we all know that the speed misses the revolution that was continuously happened in the market. The structure or pattern from the starting of the way of traders trade to the wy that how was the market structure , all the things are now different in this high frequency world.

The review of important themes in the analysis of market microstructure and/or high frequency trading are as follows :-

Many of the persons have a view that when the things are very fast , the market structure becomes irrelevant but actually the reality is that there is a opposite in this case.

The trading with high frequency is strategic the reason behind it is that it maximises against the market design.

Market Microstructure can helps us to provide the more policy guidance.

High frequencing data is also useful for the price formation