Market Microstructure

Introduction to Market Microstructure and Trading Strategies

Course Number: 333021018

Economic transactions take place under various contexts, ranging from perfectly competitive capital markets, in which both sellers and buyers are price takers, to auctions in which monopolistic sellers invite competitive bidding from a set of better informed potential buyers. The theory of market microstructure concerns the intermediate situations in which buyers and/or sellers may possess private information but none of them has the monopolistic power to determine prices.

While providing the students with sufficient knowledge about market structure theory in various contexts, the ultimate goal of this course is to help them develop good understanding and insights into important issues such as optimal market structure and design, price formation and price discovery, transaction and timing cost, information and disclosure, the market maker and investor behavior, and relevance to efficiency.

We will use "Financial Markets and Trading: An Introduction to Market Microstructure and Trading Strategies" by Anatoly B. Schmidt as the required textbook. This book, although succinct, provides fairly updated information about the progress in this field.

The course material, including a weekly course plan can be found at ecampus.