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Module Title Market Microstructure
SchoolBirmingham Business School
Department Birmingham Business School
Module Code 07 27625
Module Lead Patricia Chelley-Steeley
Level Masters Level
Credits 10
Semester Semester 2
Pre-requisites
Co-requisites
Restrictions None
Contact Hours
Exclusions
Description The aim of this module is to provide an advanced level understanding of market microstructure. We will examine the role of different trading mechanisms and will study the role of different types of traders such as informed and noise traders. We will critically examine how different trading systems influence key concepts in market microstructure such as market quality, liquidity and operational efficiency. Drawing on mathematical microstructure models we will analyse the components of the bid-ask spread and examine spread estimation models such as the Roll model. We will draw on recent empirical research to examine current issues in market microstructure such as the development of high frequency trading, dark pools, declimalisation and market manipulation. We will examine the role of experimental finance in market microstructure research.
Learning Outcomes By the end of the module students should be able to:
  • Recognise and apply concepts widely used in market microstructure.
  • Critically appraise different trading systems and the empirical evidence that examines the impact on securities markets of changes to the trading system.
  • Recognise the trading systems employed in key financial markets such as Xetra, London Stock Exchange, NASDAQ and NYSE and why they have been employed.
  • calculate key microstructure measures such as the quoted spread, effective spread, Roll spread, measures of efficiency and market quality.
  • synthesise and discuss arguments and evidence relating to market microstructure.
  • solve selected mathematical models used in market microstructure.
  • demonstrate knowledge of key developments in market microstructure and understand their effects.
Assessment 27625-01 : Examination : Exam (Centrally Timetabled) - Written Unseen (75%)
27625-02 : Class Test : Class Test (25%)
Assessment Methods & Exceptions Assessments:
one hour test (25%) and a 2 hour exam (75%)

Reassessment: A 2 hour exam (100%)
Other None
Reading List