Paper: arXiv 2609.33058

Authors: Irene Aldridge

Abstract

Market microstructure studies how trading rules turn orders into prices and allocations. Those rules have been rebuilt repeatedly: for floor traders, electronic limit order books and high-frequency trading, batch auctions and dark pools, blockchains run by automated market makers and block builders, and now AI agents that discover, pay for, and compete over resources. This survey traces that evolution through one question: can a market allocate scarce goods efficiently and fairly without participants revealing everything they know and want? Each technological shift moved the binding constraint of market design from trader rationality to speed, to control over transaction ordering, to the dimensionality of what participants can report. Impossibility results persist; only their cost moves. We review evidence on high-frequency trading, trading venues, automated market makers, extractable value and algorithmic collusion, and identify allocation as the missing layer of the agent-commerce protocol stack.

Complexity vs Empirical Score

  • Math Complexity: 4.0/10
  • Empirical Rigor: 3.0/10
  • Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: This paper is a comprehensive survey, not presenting new empirical work or complex mathematical derivations. Its strength lies in synthesizing existing knowledge and framing it within a novel conceptual framework, particularly regarding AI agents. The lack of empirical data or code naturally limits its scores in rigor and reproducibility.

Research Flowchart

  flowchart TD
    A[Research Goal: How can a market allocate scarce goods efficiently and fairly without full revelation?] --> B{Methodology: Tracing Evolution of Market Microstructure};
    B --> C[Data/Inputs: Historical & Current Trading Rules, HFT, Trading Venues, AMM, MEV, Algorithmic Collusion];
    C --> D{Computational Process: Analysis of Technological Shifts & Binding Constraints};
    D --> E[Key Findings: Impossibility results persist, cost of non-revelation moves; Allocation is missing layer of agent-commerce protocol stack];