Analyzing the Relationship Between Market Microstructure and Information Asymmetry in High-Frequency Trading

Posted: Aug 11, 2025

• Chloe Johnson
• Chloe Robinson
• Chloe Rodriguez

Abstract

The landscape of financial markets has undergone a profound transformation with the advent of high-frequency trading, creating complex interactions between market microstructure and information asymmetry that traditional financial models struggle to capture. This research addresses the critical gap in understanding how market microstructure characteristics influence and are influenced by information asymmetry in high-frequency environments. While extensive literature exists on both market microstructure and information asymmetry separately, the dynamic interplay between these phenomena in modern electronic markets remains inadequately explored. Our study introduces a novel analytical framework that transcends conventional approaches by integrating principles from quantum information theory with financial econometrics, offering unprecedented insights into the micro-temporal dynamics of information flow in financial markets.