Course 2019-2020 a.y.

30181 - THE MICROSTRUCTURE OF FINANCIAL MARKETS

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) - BESS-CLES (6 credits - II sem. - OP  |  SECS-P/01) - WBB (6 credits - II sem. - OP  |  SECS-P/01) - BIEF (6 credits - II sem. - OP  |  SECS-P/01) - BIEM (6 credits - II sem. - OP  |  SECS-P/01) - BIG (6 credits - II sem. - OP  |  SECS-P/01) - BEMACS (6 credits - II sem. - OP  |  SECS-P/01)
Course Director:
BARBARA RINDI

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


Mission & Content Summary

MISSION

Two are the main objectives of this course: (1) 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. (2) Teach the students how to trade securities on an electronic order book market like London Stock Exchange, Borsa Italiana, NASDAQ, NYSE, or alternative trading systems (lit and dark pools).

CONTENT SUMMARY

Financial Market Structures:

  • Novelties from Market Microstructure and Research Objectives.
  • Trading Process:
  • Continuous vs batch auction.
  • Orders and order properties.
  • Market Participants and the role of market makers.
  • Market  Structure.
  • Trading sessions: call and continuous auction markets.
  • Execution systems: order-driven, quote-driven and hybrid markets.
  • Trading  Rules for Order Driven Markets.
  • Price formation.
  • Matching rules.
  • Guidelines  for Price Monitoring, Price Discovery.
  • Circuit breakers and market crashes.
  • Pricing and Trading fees: Make-Take vs Symmetric Pricing Structure.
  • Algorithmic Trading and High Frequency Trading (HFT).
  • Regulatory Debate (U.S. and Europe) on Dark Liquidity, Tick Size, Trading Fees.
  • Experimental Trading Game at BELSS LAboratory, Bocconi.

Intended Learning Outcomes (ILO)

KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...
  • Understand how financial markets work.
  • Evaluate the current debate (U.S. and Europe) on the structure and design of financial markets.

APPLYING KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...
  • Trade on the most advanced existing trading plaftorms around the World.

Teaching methods

  • Face-to-face lectures
  • Guest speaker's talks (in class or in distance)

DETAILS

Lectures and guest speaker's talks.


Assessment methods

  Continuous assessment Partial exams General exam
  • Written individual exam (traditional/online)
     x

ATTENDING STUDENTS

Written exam at the end of the course based on the program:

  • Financial Market Structures:
  • Novelties from Market Microstructure and Research Objectives.
  • Trading Process:
  • Continuous vs batch auction.
  • Orders and order properties.
  • Market Participants and the role of market makers.
  • Market  Structure.
  • Trading sessions: call and continuous auction markets.
  • Execution systems: order-driven, quote-driven and hybrid markets.
  • Trading  Rules for Order Driven Markets.
  • Price formation.
  • Matching rules.
  • Guidelines  for Price Monitoring, Price Discovery.
  • Circuit breakers and market crashes.
  • Pricing and Trading fees: Make-Take vs Symmetric Pricing Structure.
  • Algorithmic Trading and High Frequency Trading (HFT).
  • Regulatory Debate (U.S. and Europe) on Dark Liquidity, Tick Size, Trading Fees.

NOT ATTENDING STUDENTS

Written essay in the spirit of  the program:

  • Financial Market Structures:
  • Novelties from Market Microstructure and Research Objectives.
  • Trading Process:
  • Continuous vs batch auction.
  • Orders and order properties.
  • Market Participants and the role of market makers.
  • Market  Structure.
  • Trading sessions: call and continuous auction markets.
  • Execution systems: order-driven, quote-driven and hybrid markets.
  • Trading  Rules for Order Driven Markets.
  • Price formation.
  • Matching rules.
  • Guidelines  for Price Monitoring, Price Discovery.
  • Circuit breakers and market crashes.
  • Pricing and Trading fees: Make-Take vs Symmetric Pricing Structure.
  • Algorithmic Trading and High Frequency Trading (HFT).
  • Regulatory Debate (U.S. and Europe) on Dark Liquidity, Tick Size, Trading Fees.

Teaching materials


ATTENDING AND NOT ATTENDING STUDENTS

  • Lecture notes (Bboard) and selected articles.
  • Selected chapters from:
    • B. JOHNSON, Algorithmic Trading & DMA,  4Myeloma Press, 2010.
    • L. HARRIS, Trading and Exchanges. Market Microstructure for Practitioners, Oxford University Press, 2003.
    • R. LYONS, The Microstructure Approach to Exchange Rate, MIT Press, 2001.
Last change 28/05/2019 14:07