market-microstructure

The order book is not a law of nature. Someone chose the tick size, the priority rule, and whether trading runs continuously or in batches, and each choice determines who profits. This lesson reads the latency arms race as a predictable consequence of one design decision rather than a moral failure, and covers what changes when the design does.

Nobody announces what an asset is worth, yet prices move toward it. The mechanism is order flow: trading is how private information becomes public price. This lesson builds Kyle's model of that process, separates the part of your impact that is permanent from the part that reverts, and explains why size costs more than depth alone predicts.

Competition should compress the bid-ask spread to nothing, and it does not. The reason is not fees or greed: a spread survives even when trading is free and the quoting participant expects zero profit. This lesson builds the adverse selection argument, then shows how to measure which part of a spread is information and which part is rent.

A market price is not published by anyone. It is the residue of a queue of resting orders and the orders that consume them. This lesson builds the limit order book and its matching rules, shows what a fill actually costs, and takes apart the assumption that an instrument has one price at all.

The edge that survives statistics still has to survive trading. Spread, market impact and the square-root law, why every strategy has a capital ceiling, and the research protocol that makes a backtest worth believing.