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Describe
· the main ideas in the functioning of exchanges and markets.
· the fundamentals of liquidity services.
Contrast concepts like
· orders, trades and quotes.
· brokers, dealers, market makers and specialists.
· dealer markets, auction markets, order-driven markets, floor markets, continuous markets, call markets,
hybrid markets.
Identify
· flaws in market and exchange design.
· factors that affect the quality of markets.
Analyze
· trading and order submission strategies.
Paraphrase
· academic papers within the field.
Students will learn how securities markets function. In particular how trading is organized and how market structures are different for different securities. That the same type of security can trade in very different market structures, but that trading models for equities seem to converge across the globe. Finally, we will take a look
at regulation and why regulation matters. Overall the main focus will be on equity markets, but many of the concepts are relevant also for FX, derivatives and fixed income instruments. We will read and discuss several articles. The majority of the articles will have an empirical content or be case studies.
COURSE SUBJECT AREAS:
The course is organized in 2 modules (A-B):
Module A.: Securities, markets and the people who trade in them.
This part of the course takes 16 hours. The teaching format is lectures. Lectures are supposed to give the student an overview and an introduction to market microstructure. The lectures will not follow book chapters or articles. Instead, the students will be given handouts of the slides. The slides will have literature references.
Some (but not all) of the references will be in the exam requirements.
Planned topics are:
i) securitization and types of securities.
ii) liquidity services.
iii) markets and exchanges.
iv) motives for trading and types of traders.
v) the history of exchanges.
vi) auctions and order-driven markets.
vii) precedence rules in order-driven markets.
viii) dealer and OTC markets.
ix) floor markets and electronic trading.
x) exchange design.
xi) measurements of liquidity.
Module B.: Selected topics in market microstructure.
This part of the course takes 8 hours. The teaching format is lectures and class discussions of articles and book chapters on selected topics.
Planned topics are:
i) Dealers, dealer markets and market making.
ii) Heterogeneously informed traders.
iii) The theory of bid-ask spreads.
iv) Liquidity and transactions cost measurements.
All literature in this module will be part of the exam requirements.
3376 Financial markets and corporate strategy, 3620 Econometrics
Carsten Tanggaard
Lectures and workshops.
English
1. Harris, Larry: Trading and Exchanges - Market Microstructure for Practitioners, Oxford University Press, 2003. Selected chapters will be announced before the course begins.
2. Cases and articles (approx. 6). Titles will be announced before the course starts.
3. Slides and lecture notes.
FORM OF ASSESSMENT: Oral exam of 20 min. duration with 20 minutes preparation time. Exam questions will be posted 2 weeks before the oral exam.
EXAMINATION AIDS ALLOWED: Own notes (maximum 30 pages). Nothing else.
