9781118278444

A comprehensive guide to the dynamic area of finance known as market microstructure

Interest in market microstructure has grown dramatically in recent years due largely in part to the rapid transformation of the financial market environment by technology, regulation, and globalization. Looking at market transactions at the most granular level—and taking into account market structure, price discovery, information flows, transaction costs, and the trading process—market microstructure also forms the basis of high-frequency trading strategies that can help professional investors generate profits and/or execute optimal transactions.

Part of the Robert W. Kolb Series in Finance, Market Microstructure skillfully puts this discipline in perspective and examines how the working processes of markets impact transaction costs, prices, quotes, volume, and trading behavior. Along the way, it offers valuable insights on how specific features of the trading process like the existence of intermediaries or the environment in which trading takes place affect the price formation process.

Explore issues including market structure and design, transaction costs, information flows, and disclosure
Addresses market microstructure in emerging markets
Covers the legal and regulatory issues impacting this area of finance
Contains contributions from both experienced financial professionals and respected academics in this field

If you're looking to gain a firm understanding of market microstructure, this book is the best place to start.

H. Kent Baker (Washington D.C.) is University Professor of Finance and Kogod Research Professor at the Kogod School of Business, American University He has served on several boards of directors and advisory councils including the Eastern Finance Association and Southern Finance Association, where he is currently the Vice President - Program and President elect. . Professor Baker is the author or editor of 16 books, has published more than 250 journal articles, monographs, book chapters, and proceedings as well as 350 book reviews and abstracts. Professor Baker has consulting and training experience with more than 100 organizations. These organizations include the American Bankers Association, AT&T, The CFA Institute, Central Intelligence Agency, Comptroller of the Currency, Credit Suisse, Ernst & Young, Goldman Sachs, Institute of Management Accountants, Kaplan Schweser, New York Society of Security Analysts, Saudi Aramco, UBS, and Xerox.

Greg Filbeck (Erie, PA) holds the Samuel P. Black III Professor of Insurance and Risk Management at Penn State Erie and serves as Program Chair for Finance. Before joining the Faculty at Penn State Erie in 2006, he served as Senior Vice-President of Kaplan Schweser from 1999 to 2006 where he was in charge of all content and curriculum and helped launch marketing and sales divisions of the company. He also held academic appointments at Miami University (Ohio) and the University of Toledo, where he also served as the Associate Director of the Center for Family Business. Professor Filbeck is the author of the book Derivatives and Risk Management and editor of the book CFA® Basics: The Schweser Study Guide to Getting Started. He has published more than 60 refereed academic journal articles that have appeared in journals such as Financial Analysts Journal, Financial Review, and Journal of Business, Finance, and Accounting.

Acknowledgments

Part I Introduction to Market Microstructure

Chapter 1 Market Microstructure: An Overview (H. Kent Baker and Halil Kiymaz)

Chapter 2 Microstructure of Equity Markets (Nazli Sila Alan, Recep Bildik, and Robert A. Schwartz)

Chapter 3 Microstructure of the Euro Area Government Bond Market (Madhucchand Darbha and Alfonso Dufour)

Chapter 4 Microstructure Developments in Derivative Market (James T. Moser)

Chapter 5 The Microstructure of Currency Markets (Carol Osler and Xuhang Wang)

Chapter 6 The Architecture of Securities Market Supervision before and after the Crisis (Donato Masciandaro and Marc Quintyn)

Chapter 7 Financial Market Contagion (Thadavillil Jithendranathan)

Part II Market Architecture and Design

Chapter 8 Market Architecture: A Conceptual Framework and Real-world Systems (Massimiliano Marzo)

Chapter 9 Designing a Trading Market (Massimiliano Marzo)

Chapter 10 Current Issues in Market Design (Carole Comerton-Forde)

Chapter 11 Decimalization and Discreteness (Brittany Cole and Bonnie Van Ness)

Chapter 12 Dark Trading (Hans Degryse, Geoffrey Tombeur, Mark Van Achter, and Gunther Wufyts)

Part III Price Formation and Price Discovery

Chapter 13 Determinants of Trading Costs (Yu-Chuan Huang)

Chapter 14 Market Makers and Liquidity (Frank J. Sensenbrenner)

Chapter 15 Liquidity beyond the Inside Spread: The Price Impact of Trading (Paul J. Irvine)

Chapter 16 Price Discovery in International and Emerging Asset Markets (Yiuman Tse and Michael Williams)

Chapter 17 Holding Back Volatility: Circuit Breakers, Price Limits, and Trading Halts (David Abad and Roberto Pascual)

Part IV Transaction Costs, Timing Costs, and Information Disclosure

Chapter 18 Bid-ask Spreads, Commissions, and Other Costs (Thanos Verousis)

Chapter 19 Pre- and Post-Trade Transparency (Stephen G. Sapp and Ingrid Lo)

Chapter 20 Empirical and Experimental Research on Transparency and Disclosure (Arie E. Gozluklu)

Part V Microstructure Issues in Emerging Markets

Chapter 21 Stock Market Efficiency and Market Microstructure in Emerging Markets (Parvez Ahmed)

Chapter 22 Liquidity and Crises in Asian Markets (Charlie Charoenwong, David K. Ding, and Yung Chiang Yang)

Chapter 23 Trading Costs and Execution Strategies in Emerging Markets (Mark Humphery-Jenner and Eliza Wu)

Chapter 24 Intraday Price Behavior during Information Arrival in Emerging Markets (Jan Hanousek, Evzen Kocenda, and Jan Novotný)

Chapter 25 Market Microstructure in African Equity Markets (Sabur Mollah and Abul Hassan)

Answers to Discussion Questions

Index

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Market Microstructure in Emerging and Developed Markets Price Discovery, Information Flows, and Transaction Costs

Market Microstructure in Emerging and Developed Markets Price Discovery, Information Flows, and Transaction Costs

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Summary

Author Biography

Table of Contents

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