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Course 2015-2016 a.y.

30181 - THE MICROSTRUCTURE OF FINANCIAL MARKETS


CLEAM - CLEF - CLEACC - CLES-BESS - BIEMF
Department of Finance

Course taught in English


Go to class group/s: 31

CLEAM (6 credits - II sem. - OP  |  SECS-P/01) - CLEF (6 credits - II sem. - OP  |  SECS-P/01) - CLEACC (6 credits - II sem. - OP  |  SECS-P/01) - CLES-BESS (6 credits - II sem. - OP  |  SECS-P/01) - BIEMF (6 credits - II sem. - OP  |  SECS-P/01)
Course Director:
BARBARA RINDI

Classes: 31 (II sem.)
Instructors:
Class 31: BARBARA RINDI


Course Objectives
Three are the main objectives of this course:
  • present to the students the structure of the European and US financial markets and discuss the rules and principles that govern trading and price formation in the most advanced electronic trading platforms and auction markets
  • teach the students how to trade securities on a electronic order book markets like London Stock Exchange, Borsa Italiana, NASDAQ, NYSE, or alternative trading systems (lit and dark pools) 
  • give students the instruments to measure the quality of financial markets, and to evaluate changes in financial market regulation, market design and traders' performance



Course Content Summary
  • Financial Market Structures
    • Novelties from Market Microstructure and Research Objectives
    • Trading Process
      • continuous vs batch auction
    • Orders and order properties
    • Market Participants
      • the role of market makers 
    • Market Structure: 
      • trading sessions: call and continuous auction market
      • execution systems: order-driven, quote-driven and hybrid markets 
      • minimum trade unit regulation
    • Trading Rules for Order Driven Markets
      • price formation
      • matching rules
    • Guidelines for Price Monitoring, Price Discovery
      • circuit breakers and market crashes
    • Pricing: Trading fees: Make Take vs Symmetric pricing structure
    • Algorithmic Trading and High Frequency Trading (HFT)
    • Regulatory Debate on Dark Liquidity and Sub-Penny Trading
    • Post-trading systems: clearing and settlement (if time allows)
  • Microstructure of stock and forex markets
    • Exchanges for trading equities (e.g., Borsa Italiana/LSE, NASDAQ and NYSE), and currencies (e.g., EBS) 
    • Alternative Trading Systems (ATS), Electronic Communication Networks (ECN) and Dark Pools (DP)
  • Most recent financial legislation
    • Europe (e.g., MIFID) and US (e.g., Reg NMS and SEC latest concept releases)
  • Trading Game 
    • Students will participate to a simulation game prepared to practise real-time trading

Detailed Description of Assessment Methods
  • Written exam at the end of the course.
  • Special assessments for non-attending students (e.g., written paper) are left to the discretion of the lecturer.


Textbooks
  • Lecture notes (e-learning) and selected articles.
  • Selected chapters of Johnson, B. 2010. Algorithmic Trading & DMA. 4Myeloma Press. Harris, L., 2003. Trading and Exchanges. Market Microstructure for Practitioners, Oxford University Press. Lyons, R., 2001. The Microstructure Approach to Exchange Rate. MIT Press.

Prerequisites

Last change 16/02/2016 16:19