Using the intuition that financial markets transfer risks in “business time,” we define “market microstructure invariance” as the hypothesis that the size distribution and transaction costs of risk transfers (“bets”) are constant across assets and time. In calendar time, the invariance hypothesis results in specific empirically testable invariance relationships among those variables. A meta-model implies that invariance relationships are ultimately related to granularity of information flow.Based on a dataset of 400,000+ portfolio transition orders, we show that quantitative predictions of microstructure invariance concerning bets sizes and transactions costs as functions of observable volume and volatility closely match the data. We calibrate invariant parameters and discuss implications for financial markets.
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