  In this chapter we review some recent results on the dynamics of price
formation in financial markets and its relations with the efficient market
hypothesis. Specifically, we present the limit order book mechanism for markets
and we introduce the concepts of market impact and order flow, presenting their
recently discovered empirical properties and discussing some possible
interpretation in terms of agent's strategies. Our analysis confirms that
quantitative analysis of data is crucial to validate qualitative hypothesis on
investors' behavior in the regulated environment of order placement and to
connect these micro-structural behaviors to the properties of the collective
dynamics of the system as a whole, such for instance market efficiency. Finally
we discuss the relation between some of the described properties and the theory
of reflexivity proposing that in the process of price formation positive and
negative feedback loops between the cognitive and manipulative function of
agents are present.
