Course 2025-2026 a.y.

30181 - THE MICROSTRUCTURE OF FINANCIAL MARKETS

Department of Finance


Class timetable
Exam timetable

Course taught in English
Go to class group/s: 31
BAI (6 credits - II sem. - OP  |  SECS-P/01) - BEMACS (6 credits - II sem. - OP  |  SECS-P/01) - BESS-CLES (6 credits - II sem. - OP  |  SECS-P/01) - BGL (6 credits - II sem. - OP  |  SECS-P/01) - BIEF (6 credits - II sem. - OP  |  SECS-P/01) - BIEM (6 credits - II sem. - OP  |  12 credits SECS-P/01) - BIG (6 credits - II sem. - OP  |  12 credits SECS-P/01) - CLEACC (6 credits - II sem. - OP  |  SECS-P/01) - CLEAM (6 credits - II sem. - OP  |  SECS-P/01) - CLEF (6 credits - II sem. - OP  |  SECS-P/01) - WBB (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

Present the structure of European and US financial markets and discuss the rules and principles that govern trading and price formation on advanced electronic trading platforms and auction markets. Teach students how to trade securities on markets similar to major EU/US exchanges, on electronic limit-order books (ECNs and MTFs), including batch auctions and continuous trading systems. Provide instruments to measure market quality and to evaluate changes in market regulation, market design, and traders' performance.

CONTENT SUMMARY

1. 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.
  • Trading rules for order-driven markets: price formation and matching rules.
  • Guidelines for price monitoring and price discovery, including circuit breakers and market crashes.
  • Case studies on market manipulation and market resiliency.
  • Algorithmic trading and high-frequency trading (HFT).
  • Regulatory debate (U.S. and Europe) on dark liquidity, tick size, trading fees, and closing auction volumes.
  • Trading fees: Make–Take, Take–Make, vs. symmetric pricing structures.
  • Market-data economics: exchanges' trading vs. data revenues.
  • Behavioral biases and bounded rationality in trading and price formation.

2. Microstructure of Stock Markets

  • Exchanges for trading equities (e.g., LSE, NASDAQ, NYSE).
  • Alternative Trading Systems (ATS), Electronic Communication Networks (ECN), and Dark Pools.

3. Most Recent Financial Legislation

  • Europe: MiFID II / MiFIR and subsequent updates.
  • United States: Regulation NMS and recent SEC concept releases and rule proposals.

4. Additional Markets

  • Brief introduction to government bond markets and dealer-based trading.
  • Brief introduction to cryptocurrency and digital asset markets.

Intended Learning Outcomes (ILO)

KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...
  • Explain the trading process in call/batch and continuous auctions and compare order-driven, quote-driven, and hybrid systems.
  • Classify order types and properties, and articulate the role of market makers and other participants.
  • Analyze price formation and matching rules in order-driven markets and relate them to liquidity provision and execution outcomes.
  • Evaluate market quality along key dimensions such as liquidity, informational efficiency, volatility, and participant welfare.
  • Discuss regulatory debates on dark liquidity, tick size, trading fees, market data, and the role of closing auctions.
  • Recognize the implications of algorithmic and high-frequency trading and automation for market design and monitoring.

APPLYING KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...
  • Explain the trading process in call/batch and continuous auctions and compare order-driven, quote-driven, and hybrid systems.
  • Classify order types and properties, and articulate the role of market makers and other participants.
  • Analyze price formation and matching rules in order-driven markets and relate them to liquidity provision and execution outcomes.
  • Evaluate market quality along key dimensions such as liquidity, informational efficiency, volatility, and participant welfare.
  • Discuss regulatory debates on dark liquidity, tick size, trading fees, market data, and the role of closing auctions.
  • Recognize the implications of algorithmic and high-frequency trading and automation for market design and monitoring.

Teaching methods

  • Lectures
  • Guest speaker's talks (in class or in distance)
  • Practical Exercises
  • Collaborative Works / Assignments

DETAILS

  • Lectures anchored to the course slides and lecture notes.
  • Guided in-class exercises on order-driven trading and market-quality measurement.
  • Discussion of regulatory developments and design trade-offs.
  • Several presentations by market professionals from the industry (e.g., CONSOB, Euronext, MTS, and others).
  • Use of real-world trading examples and regulatory case studies.

Assessment methods

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

ATTENDING AND NOT ATTENDING STUDENTS

  • Written exam at the end of the course.
  • Special assessments for non-attending students are left to the discretion of the lecturer.

Teaching materials


ATTENDING AND NOT ATTENDING STUDENTS

Lecture notes (Blackboard) and selected articles.

Selected chapters from:

  • Johnson, B. (2010). Algorithmic Trading & DMA. 4Myeloma Press.
  • Harris, L. (2003). Trading and Exchanges: Market Microstructure for Practitioners. Oxford University Press.


Updates, announcements, and materials will be posted on Blackboard.

Last change 12/01/2026 18:01