Postgraduate Course: Financial Market Microstructure (CMSE11685)
Course Outline
| School | Business School |
College | College of Arts, Humanities and Social Sciences |
| Credit level (Normal year taken) | SCQF Level 11 (Postgraduate) |
Availability | Not available to visiting students |
| SCQF Credits | 20 |
ECTS Credits | 10 |
| Summary | The course provides an advanced level analysis of the technological transformation of modern financial markets from a market microstructure perspective. Particular focus will be on the evolution of UK and US financial markets. |
| Course description |
Financial markets have undergone transformational changes over the past two decades, with the last decade seeing the most significant evolution in the ways financial trading platforms operate. Two key factors combine to ring in these changes: the declining costs of technological innovation and paradigm-shifting policy and regulatory reorientations. As an example, in Europe, the enactment of the Markets in Financial Instruments Directive (MiFID) in 2007 coupled with technological advances in trading systems led to the proliferation of new technology- and data-driven trading venues that have emerged as electronic competitors to traditional stock exchanges. This course examines the microstructure effects of these changes and what they mean for asset pricing and market quality characteristics. Insights gained can be applied to asset management and securities policymaking and regulation.
Outline content
-Orders
-Traders
-Institutions and market structure
-Transaction costs
-Modelling long-run relationships in financial markets: stationarity, vector error correction models
-Liquidity
-Price discovery and informational efficiency
-Algorithmic/high frequency trading
-Latency arbitrage
-Market crashes, flash crashes
-Market fragmentation
-Dark trading
-Frequent batch auctions
-Market microstructure and the real economy
Student learning experience
Formal teaching occurs in lectures. Much of the learning will be the result of students own reading and reflection, and preparation for lectures and coursework. A high level of student participation is expected, through discussions in class. Scholarly endeavour is fundamentally about building on the discoveries and insights of others, and we hope that students cooperating by informally forming learning groups will enrich them.
|
Course Delivery Information
|
| Academic year 2025/26, Not available to visiting students (SS1)
|
Quota: None |
| Course Start |
Semester 2 |
Timetable |
Timetable |
| Learning and Teaching activities (Further Info) |
Total Hours:
200
(
Lecture Hours 20,
Seminar/Tutorial Hours 3,
Programme Level Learning and Teaching Hours 4,
Directed Learning and Independent Learning Hours
173 )
|
| Assessment (Further Info) |
Written Exam
0 %,
Coursework
100 %,
Practical Exam
0 %
|
| Additional Information (Assessment) |
60% Essay (Individual) - 2,400 words - Assesses all course Learning Outcomes
40% Presentation - Group - 10-15 minutes - Assesses all course learning Outcomes |
| Feedback |
Formative: All students will be offered formative feedback or feedforward opportunities (individually or as part of a group) for the assessment exercises in time to be useful in the completion of the summative coursework.
Summative: Summative marks will be returned on a published timetable, which will be made clear to students at the start of the course. Summative feedback will comprise of individual written feedback on the individual component of the course assessment and verbal feedback for the group presentation component. |
| No Exam Information |
Learning Outcomes
On completion of this course, the student will be able to:
- Demonstrate a critical understanding of the nature and structure of modern financial markets and how prices are formed within them.
- Demonstrate a critical understanding of the roles technology, regulation and policy in the evolution of the microstructure of financial markets.
- Demonstrate an appreciation for the role of financial markets within the global economy.
- Demonstrate a critical awareness for the (potential) effects of macro and/or micro events on financial markets.
|
Reading List
Schmidt, A. B. (2011) Financial Markets and Trading: An Introduction to Market Microstructure and Trading Strategies. New Jersey: Wiley Finance
Hasbrouck, J. (2007) Empirical Market Microstructure, Oxford University Press
|
Additional Information
| Graduate Attributes and Skills |
Communication, ICT, and Numeracy Skills
After completing this course, students should be able to:
Convey meaning and message through a wide range of communication tools, including digital technology and social media; to understand how to use these tools to communicate in ways that sustain positive and responsible relationships.
Critically evaluate and present digital and other sources, research methods, data and information; discern their limitations, accuracy, validity, reliability and suitability; and apply responsibly in a wide variety of organisational contexts.
Cognitive Skills
After completing this course, students should be able to:
Be self-motivated; curious; show initiative; set, achieve and surpass goals; as well as demonstrating adaptability, capable of handling complexity and ambiguity, with a willingness to learn; as well as being able to demonstrate the use digital and other tools to carry out tasks effectively, productively, and with attention to quality.
Knowledge and Understanding
After completing this course, students should be able to:
Demonstrate a thorough knowledge and understanding of contemporary organisational disciplines; comprehend the role of business within the contemporary world; and critically evaluate and synthesise primary and secondary research and sources of evidence in order to make, and present, well informed and transparent organisation-related decisions, which have a positive global impact.
Identify, define and analyse theoretical and applied business and management problems, and develop approaches, informed by an understanding of appropriate quantitative and/or qualitative techniques, to explore and solve them responsibly. |
| Keywords | Financial markets,traders,orders,algorithmic trading,market fragmentation,dark pools,low late |
Contacts
| Course organiser | Dr Gbenga Ibikunle
Tel: (0131 6)51 5186
Email: Gbenga.Ibikunle@ed.ac.uk |
Course secretary | |
|
|
University Homepage