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Market Microstructure Meaning

The "internal mechanics" of how a market operates-specifically how orders are matched, how information is displayed, and how participants interact. It is the study of the "plumbing" rather than the "economics." Microstructure looks at things like Tick Size (the smallest price movement allowed), Latency, and Fee Structures.

It asks: "Does the way this exchange is built make it easier for 'Bots' to win than 'Humans'?" Understanding microstructure is vital for "Algorithmic Traders." They don't just look at "Price" and "Volume"; they look at the "Speed" of the order book updates and the "Pattern" of how other traders are placing their orders.

By understanding the "Rules of the Game," they can find tiny edges that aren't visible to the average investor.

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