Principles of Securities Trading

Catalog description

Most finance courses focus on how securities are defined, valued and used. This course is about how securities are traded: the design, operation and regulation of trading processes, mechanisms and protocols. Today's markets for stocks, bonds, and derivatives span a wide range in sophistication and complexity. For some securities, the market has evolved to an integrated network that offers very high levels of access and transparency. At the other extreme we have markets that operate as small dealer networks sustained by reputation and relationship. Some mechanisms are new (the open electronic limit order book); some are as old as antiquity (the single price call auction). We have a general sense that all markets are heading toward some sort of electronic future, but the speed of progress and convergence varies widely. Our markets are infused with tensions between efficiency and fairness, competition and regulation, consolidation and fragmentation, speed and stability, and so on. The course is based on a realistic picture of the trading process, so we go into a fair amount of institutional detail, as well as some law and market regulation. The intellectual framework for the material comes from mainstream economics, financial economics, and the newer subfield of financial economics known as market microstructure.