Handbook

This course introduces undergraduate students to the theory and practice of securities trading at exchanges and dealer markets. It examines existing market structures, types of traders and the strategies they use to achieve their objectives. In this course, we study how and why investors trade and the impact of various market structures on the interaction and outcomes of security transactions. Most finance courses assume that securities trade in an idealized costless, frictionless world. In reality, there are many frictions: bid-ask spreads, trade impact on price, brokerage commissions, quantity limitations, time delays, etc. This subject examines how trading and the design of markets affect volatility, liquidity, trading costs, price efficiency and trading outcomes. The course will also introduce the students to the daily activities of a real trading room. The students are introduced to different markets and through the use of class exercises and in-class trading simulations, the students will be exposed to the practical issues related to trading in financial securities.