6151 - THE MICROSTRUCTURE OF FINANCIAL MARKETS

Three are the main objectives of this course:

• present to the students the structure of the European and US financial markets for stocks, bonds and derivatives, and discuss the rules and principles that govern trading and price formation in the most advanced Exchanges and other trading venues
• teach the students  how to trade securities on a market similar to LSE, Borsa Italiana, NYSE-Euronext and new trading venues (including MTFs 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

1. Financial Market Structures and Market Microstructure Foundations (including practical examples):

• trading sessions: call and continuous auction markets
• execution systems: order-driven, quote-driven and hybrid markets
• order types submitted in different trading venues
• price formation and matching rules
• transparency, market supervision and reporting rules
• market participants
• post-trading systems: clearing and settlement

2. Microstructure of stock markets:

• Exchanges: Borsa Italiana, LSE, Nyse.Euronext
• Alternative trading venues: Multilateral Trading Facilities (MTF), Systematic Internalizers (SI) and Dark Pools

3. Evolution of securities markets: effects of technology and regulation; market participants needs

4. Main metrics describing markets functioning

5. Liquidity, Block trading  and Implicit transaction costs measurement

6. Most recent financial legislation: 

• Evolution of the Italian Law
• European directives, in particular MiFID (Best Execution, Pre and Post-Trade Transparency)
• Competition within and among Markets

7. Exchanges governance, demutualisation

This course is assessed by a written exam

• The exam will be based on lecture notes and documents available in the e-learning space

To deepen the analysis of Market Microstructure, students may refer to:

• F. De JONG, B. RINDI, The Microstructure of Financial Markets, Cambridge University Press, 2009
• L. Harris, Trading and Exchanges. Market Microstructure for Practitioners, Oxford University Press, 2003
• R. SCHWARTS, R. FRANCIONI, Equity Markets in Actions. The Fundamentals of Liquidity, Market Structure & Trading, Wiley, 2004