The last three or four years have seen an explosion in the literature on asset markets with asymmetric information and especially on trading mechanisms, an area called the ‘microstructure of financial markets.” There are a number of reasons for this development. First, following the crash of 1987 and, more generally, given the increasing complexity of the trading environment, many policy issues include the interaction between different exchanges where the same or very closely related securities are traded, the role of designated market makers, the desirable degree of competition among market makers, the type of information which should be communicated during the trading process to various participants (e.g., what information about the trading process should become public and when, how should communication between market makers and different exchanges be structured), and so on. A number of reports issued after the stock market crash have emphasized the need to study the details of the trading process. Since the interaction between asymmetrically informed traders is central to many of the questions in this area, it has become important to work with models in which traders are asymmetrically informed.