Introduction to Market Microstructure

“Paul Besson is a world-expert in the areas of market microstructure and algorithmic trading. He has recently produced a fine series of  lectures on this  subject. Lectures cover order-book dynamics, execution costs,  the market impact of trading, transaction cost analysis and other topics which are hard  to find together in  one place, let alone in MOOC format . I recommend  Paul’s lectures to all those interested in learning more about this essential part of modern stock trading.” (New York, May 2020)

Professor Marco Avellaneda, New York University

“Financial markets today are extremely complex, and the language of markets is full of jargon and acronyms, which makes it difficult for people working outside of the markets to understand how markets work.  Paul’s MOOC makes market microstructure accessible to everyone.  He carefully explains the basic building blocks of the market including order books, algorithms, and liquidity.  Then he moves on to help the viewer to understand the interaction between competition and liquidity and why microstructure is important.  I recommend the MOOC to anyone wanting to enhance their understanding of markets.” (Sydney, May 2020)

Professor Carole Comerton-Forde, UNSW

“Paul Besson has built a one of a kind course that I recommend to anyone interested in market microstructure. It is an accessible entry point for beginners, but is also be useful to advanced researchers in the field. The course takes an approach to market microstructure, that relies on data science and the practical exercises help strengthen the concepts. Highly recommended!” (New York, May 2020)

Sasha Stoikov, Cornell

“Paul Besson’s MOOC on market microstructure gives a unique insight on cutting-edge stylized facts on price formation and order matching mechanisms. I recommend it to all graduate students, researchers who want to provide realistic analyses, and quants who have to understand the mechanisms in place when information is digested by prices, at high frequency as well as at low frequency.

Paul is a high level practitioner who is contributing the common understanding of academics and the industry are jointly building for years. It is a chance for all of us that he provides, under the umbrella of the Louis Bachelier Institute Research Initiative on microstructure, such a wonderful dissemination material.” (Paris, May 2020)

Charles-Albert Lehalle, Quantitative R&D Lead at Abu Dhabi Investment Authority (ADIA)

“A liquid and stable stock market plays a critical role in the economy. It channels savings into long term investments that are necessarily illiquid while providing liquidity to investors through access to their capital when needed by trading with others, thereby promoting economic growth.  Therefore every investor has to know how stocks are traded – i.e., the microstructure of the stock market — some in more detail than others. Paul Besson’s MOOC, “Practical Introduction to Market Microstructure”, integrates theory and practice in the market microstructure area in an elegant manner taking into account recent developments in practice that will meet the demand for knowledge from individual investors as well investment professionals.  An impressive achievement!” (Chicago, May 2020)

Ravi Jagannathan, Professor of Finance, Kellogg school of management, Northwestern University

“The mooc by Paul is just the perfect introduction to market microstructure. As a practitioner, Paul’s lectures are completely in line with actual market practices and challenges. No heavy mathematics or too simple irrealistic models here but an efficient, rigorous and pragmatic view about what is important to understand in this field which is at the very heart of financial markets. Thanks to Paul pedagogical efforts, several degrees of lectures are possible.
It means that this mooc is addressed at the same time to beginners, without any knowledge of finance or mathematics, and to researchers or market practitioners who wish to know more about the topic. From a broker’s as well as from an exchange’s perspectives, Paul presents in a very clear way the key concepts and issues taking place at the microstructure level. The interactions between the different agents (traders, brokers, investors, exchanges, regulators…) are very well described so that at the end of the lectures, one is able to perfectly understand the subtle equilibrium that the microstructure ecosystem represents. More than that, Paul also provides the most relevant technical elements enabling us to have a quantitative view on the mechanisms operating at this microscopic level, where the price formation process originates. I highly recommend Paul’s mooc to anybody interested in the field and will definitely use it myself in my classes.”

Remerciements

Avec mes co-auteurs, nous voudrions remercier ceux et celles qui ont contribué à ce Mooc.

En particulier Feriel Boushaki de l’Institut Louis Bachelier pour son précieux soutien sur ce projet, nos éditeurs : Greg Aston, Andy Artus, Keith Katlin et Anton Gerasimov, pour leur aide précieuse ; Alix Beaurepaire, Paul Farnet et Aurelien Crocq de “The Mooc agency” pour leur contribution technique, et enfin tous les stagiaires, commerçants et les professionnels dont les nombreuses questions nous ont aidés à construire ce Mooc.

Je remercie également les partenaires du projet : L’Institut Louis Bachelier, le Collège de France et l’initiative de recherche Kepler Cheuvreux pour leur sponsorship.