Tribhuvan University
Faculty of Management
Office of the Dean
Bachelor of Business Administration in Finance (BBA-F)
Course Description
:Value chain in securities trading industry will be the core component of this course. There will be sufficient emphasis on topics such as securities market structure and design, trading platforms and procedures, pre -trade activities and post -trade processing, role a nd responsibilities of relevant organizations in trade life cycle, and the legal aspects of securities market. Students will also be introduced to the approaches of securities market performance evaluation. Course Learning Outcomes On completion of this course the students will be able to: Define the role and responsibilities of the institutions in securities trading industry; Explain how securities are traded: securities trade life cycle, and architecture and design of the trading processes and protocols; Compare and contrast the major attributes of exchange based, over -the-counter and alternative trading systems; Develop an understanding of securities pricing procedures; Interpret the role of regularity framework to facilitate trading and prevent market abuse; Demonstrate skills required for efficient participation in securities trading activities; Relate the standard practices in securities market with Nepalese context; Build a basic foundation to research in market microstructure field of study.
Course Objective
:This course focuses on fundamentals of securities market microstructure. The objective of the course is to provide an extended insight into structure of securities trading, organization and functioning of securities market infrastructures (SMIs), and regulatory frameworks of securities trading industry. The course will help students to deepen understanding of securities trading mechanism, and to develop skills required to par ticipate efficiently in securities trading activities. In addition, the course will support students to be acquainted with basic knowledge required to research in different facets of market microstructure theory and empirics. Course Description Value chain in securities trading industry will be the core component of this course. There will be sufficient emphasis on topics such as securities market structure and design, trading platforms and procedures, pre -trade activities and post -trade processing, role a nd responsibilities of relevant organizations in trade life cycle, and the legal aspects of securities market. Students will also be introduced to the approaches of securities market performance evaluation. Course Learning Outcomes On completion of this course the students will be able to: Define the role and responsibilities of the institutions in securities trading industry; Explain how securities are traded: securities trade life cycle, and architecture and design of the trading processes and protocols; Compare and contrast the major attributes of exchange based, over -the-counter and alternative trading systems; Develop an understanding of securities pricing procedures; Interpret the role of regularity framework to facilitate trading and prevent market abuse; Demonstrate skills required for efficient participation in securities trading activities; Relate the standard practices in securities market with Nepalese context; Build a basic foundation to research in market microstructure field of study.
Course Contents:
Lecture hours show the approximate classroom time allocated to each unit.
Unit 1. Introduction to Securities Trading and Markets
- Trades, traders, securities and markets
- Securities trading
- Bargaining
- Auctions
- Concept of market microstructure
- Trading and the broader economy.
Unit 2. Securities Trading Industry
- Traders and motives to trade: utilitarian traders, profit -motivated traders, futile traders
- Trade life cycle
- Investment banks/merchant banks: concept, roles and responsibilities
- Exchanges: concept, features, roles a nd responsibilities
- Brokers: functions of brokerage firm, structure of a brokerage firm, broker profitability, principal -agent problem, brokering ethics
- Dealers and market makers: concept, roles and responsibilities
- Securities market infrastructures (S MIs) and their roles and responsibilities: central securities depositories (CSDs), securities settlement systems (SSSs), central counterparty clearing (CCPs), trade repositories (TR)
- Custodians: concept, roles and responsibilities
- Credit rating agencies : concept, roles and responsibilities
- Regulators and their roles and responsibilities: governmental regulatory agencies, self -regulatory organizations, private regulatory agencies, international regulatory organizations
- Securities trading industry in Nepal.
Unit 3. Market Architecture and Design
- Initial public offering: process, pricing
- Trading on exchanges
- Over -the-counter markets
- Alternative trading systems
- Crossing networks and upstairs markets
- Orders and order properties
- Mar ket depth and liquidity
- Market structure: trading sessions, execution systems, market information systems, clearing and settlement system
- Order -driven markets: oral auctions, rule-based order-matching systems, uniform pricing rule and single price auctio ns, discriminatory pricing rule and continuous two -sided auctions
- Quote - driven markets: dealer quotations, trading with dealers, attracting order flow, dealer quotation decisions, dealer inventories, inventory risk, dealer bid/ask spreads
- Price indexes and index fund
- Price limits, circuit breakers and trading halts: concept and need
- Trading mechanism of fixed -income securities, foreign currencies, and derivative securities
- Structure of securities market in Nepal.
Unit 4. Asset Management Industry and Institutional Trading
- Structure and evolution of asset management industry
- Private management and advisory firms
- Investment companies
- Specialized investment funds
- Institutions and market impact
- Best execution, execution costs, and pr ice improvement
- Algorithmic trading
- Dark pools
- Stealth and sunshine trading
- High -frequency trading
- Flash trading and sponsored access
- Institutional trading in Nepal.
Unit 5. Market Abuse
- Illegal insider trading
- Front running and late trading
- Bluffing and market manipulation
- Payment for order flow
- Fat fingers, hot potatoes, and technical glitches
- Rogue trading and rogue traders
- Trading and Ponzi schemes.
Unit 6. Regulation of Trading and Securities Market
- Regulatory approaches and the regulatory balance
- Securities market legislation in Nepal
- Deregulation, corporate scandals, and the financial crisis
- Impact of regulatory activity
- Privatization of regulation and exchange rules
- Ethics in securities trading industry.
Unit 7. Securities Market Performance Measures
- Liquidity
- Efficiency
- Price synchronicity
- Stability
- Access.
- Basic Books:
- Harris, L. Trading and Exchanges: Market Microstructure for Practitioners . New York: Oxford
- University Press.
- Teall, J. L. Financial Trading and Investing. London: Academic Press.
Suggested Readings:
Baker, H. K. & Kiymaz, H. (Eds.). Market Microstructure in Emerging and Developed Markets: Price Discovery, Information Flows, and Transaction Costs . New Jersey: John Wiley & Sons, Inc. Harris, L. Trading and Electronic Markets: What Investment Professionals Need to Know . Charlottesville, Virginia: CFA Institute Research Foundation. Jong, F. D & Rindi, B. The Microstructure of Financial Markets . Cambridge: Cambridge University Press.