The microstructure of high frequency markets

We present a novel approach to describing the microstructure of high frequency trading using two key elements. First we introduce a new notion of informed trader which we starkly contrast to current informed trader models. We describe the exact nature of the `superior information' high frequency traders have access to, and how these agents differ from the more standard `insider traders' described in past papers. This then leads to a model and an empirical analysis of the data which strongly supp...