Course 2023-2024 a.y.

30181 - THE MICROSTRUCTURE OF FINANCIAL MARKETS

Department of Finance

Course taught in English

Class timetable
Exam timetable
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) - BAI (6 credits - II sem. - OP  |  SECS-P/01)
Course Director:
BARBARA RINDI

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


Synchronous Blended: Lessons in synchronous mode in the classroom (for a maximum of one hour per credit in remote mode)

Suggested background knowledge

No specific knowledge is required to attend this module, just the basic fundamentals of finance.

Mission & Content Summary

MISSION

Three 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 students how to trade securities on a market similar to Euronext, LSE, NASDAQ Single Book, NYSE, Crypto Exchange or on the electronic book of the ECNs and MTFs; 3/. give students the instruments to measure the quality of financial markets, and to evaluate changes in financial market regulation, market design and traders' performance.

CONTENT SUMMARY

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 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 Market
      • price formation
      • matching rules
    • Guidelines  for Price Monitoring, Price Discovery
      • circuit breakers and market crashes
    • Case Studies on Market Manipulation
    • 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 Structure
  • Microstructure of stock markets
    • Exchanges for trading equities (e.g., LSE, NASDAQ and NYSE)
    • Alternative Trading Systems (ATS), Electronic Communication Networks (ECN) and Dark Pools
  • Most recent financial legislation
    • Europe (e.g., MIFID) and US (e.g., Reg NMS and SEC latest concept releases)
  • Brief Introduction to Crypto Currency markets

Intended Learning Outcomes (ILO)

KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...

By the end of the course, students should know how the most advanced financial markets work and how a trader can place orders in a standard automated limit order platform similar to those used for trading financial instruments on the main trading platforms around the world.

APPLYING KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...
  • Trade financial instruments in the most advanced existing trading platforms.
  • Evaluate any change in market design / regulation of the existing financial trading platforms.
  • Evaluate the outcome of a trade - whether it has been done in compliance with best execution or not.

Teaching methods

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

DETAILS

There will be presentations by regulators, exchanges and market practitioners.


Assessment methods

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

ATTENDING STUDENTS

  • Written exam at the end of the course.

NOT ATTENDING STUDENTS

  • Special assessments for non-attending students (e.g., written paper) are left to the discretion of the lecturer.

Teaching materials


ATTENDING AND NOT ATTENDING STUDENTS

Textbooks

  • 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.

Last change 08/12/2023 11:12