This is a textbook on economic models of financial markets (market microstructure). The material is intended for PhD and Master's (MSc or MPhil) students in economics or finance. Readers are expected to have some background in microeconomic theory, basic finance and some statistics. The aim is to provide the student with the tools to be able to read and appreciate academic papers on market microstructure. The book can be used for a full semester course on financial markets and market microstructure.

The authors have been using draft versions of the book chapters in their PhD and Master's courses at Bocconi University, the University of Amsterdam and Tilburg University. We thank the students of these courses for their questions and suggestions. We would also like to thank several colleagues who provided us with invaluable feedback and comments. We thank our referees for their suggestions, and in particular Paolo Vitale for a thorough review of the manuscript. We are grateful to Roberto Battalio, Bruno Biais, Sabrina Buti, Paolo Colla, Gene Kandel, Jeremie Lefebvre, Marco LiCalzi, Angelo Ranaldo and in particular Ohad Kadan, Giovanna Nicodano and Ingrid Werner for their detailed comments. Our thanks also to Luisella Bosetti, Fabio Deotto, Luca Filippa, Martino Ghezzi, Alan Hodson, Larry Leibowitz, Enrico Mandelli, Clare McQuitty and other practitioners and regulators who gave us the opportunity to learn about the working of real financial markets.