- Class Number 7065
- Term Code 3360
- Class Info
- Unit Value 6 units
- Mode of Delivery In Person
- Dr Wai Liu
- Dr Wai Liu
- Class Dates
- Class Start Date 24/07/2023
- Class End Date 27/10/2023
- Census Date 31/08/2023
- Last Date to Enrol 31/07/2023
- Dr Jan Drienko
Most finance courses assume that markets are efficient and that securities can be issued and traded easily and at no cost. In practice markets are more complex and there are substantial costs associated with issuing and trading securities. This course therefore explores (i) how markets are organised; (ii) how trading is conducted in these markets; (iii) the role of different types of market participants; and (iv) how markets are regulated. It considers how these factors influence price formation, investment returns and capital raising.
Upon successful completion, students will have the knowledge and skills to:
- Discuss in depth how securities are traded in markets around the world and appreciate how this influences trading costs and liquidity;
- Communicate the role of regulation and how it impacts participants in financial markets;
- Describe in depth how price formation can be influenced by market architecture; and,
- Analyse the interaction between trading in secondary markets and capital raising in primary markets.
While students will not directly engage in research as part of this course, the course will cover significant materials including conference papers and journal articles that reflect the cutting-edge research that is being conducted within the field of financial economics. My aim is to emphasise how academic research can influence industry practice and policy making.
Additional Course Costs
Examination Material or equipment
A significant part of the course will include repeated sessions of trading game, which will be conducted during the tutorial session. The objective of the trading game is to enable students to familiarize the fundamental concepts of price discovery, informed/uninformed trading, price formation process and trading rules through a stock market simulator co-developed by A/P Marvin Wee and A/P Wai-Man Liu that simulates the ASX trading environment. The game reproduces some of the key features of an open limit order book through an online portal so that participating students will be able to interact like active traders, and enhance their understanding the microstructure of a stock market through learning by doing. All game sessions will be conducted during the tutorial and students are required to use their notebook or tablet to play the game.
Required textbook (hardcopy and e-book are both available in ANU library): Teall, J. L. (2018) Financial Trading and Investing. Second edition. Elsevier.
de Jong and Rindi, B. (2009) The Microstructure of Financial Markets. Cambridge (hardcopy is available in ANU library)
Hasbrouck, J. (2007). Empirical market microstructure: The institutions, economics, and econometrics of securities trading. Oxford University Press (Online copy is available in ANU library)
There are a variety of online platforms you will use to participate in your study program. These could include videos for lectures and other instruction, two-way video conferencing for interactive learning, email and other messaging tools for communication, interactive web apps for formative and collaborative activities, print and/or photo/scan for handwritten work and drawings, and home-based assessment.
ANU outlines recommended student system requirements to ensure you are able to participate fully in your learning. Other information is also available about the various Learning Platforms you may use.
Students will be given feedback in the following forms in this course:
- written comments
- verbal comments
- feedback to whole class, groups, individuals, focus group etc
ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). Feedback can also be provided to Course Conveners and teachers via the Student Experience of Learning & Teaching (SELT) feedback program. SELT surveys are confidential and also provide the Colleges and ANU Executive with opportunities to recognise excellent teaching, and opportunities for improvement.
|Summary of Activities
|Topic 1: The Role of Markets & Trading ProcessPre-recorded lecture + in-class lecture/workshop
|Topic 2: Order Driven Markets & Intermediated MarketsPre-recorded lecture + in-class lecture/workshop Tutorial: Introduction to Trading Game + tutorial questions
|Topic 3: Analysis of Prices I: Random Walk, Price Formation Process and Roll ModelPre-recorded lecture + in-class lecture/workshopTutorial: Trading Games 1 & 2 (Warm up game)
|Topic 4: Analysis of Prices II: Extensions of the Roll ModelPre-recorded lecture + in-class lecture/workshopTutorial: Trading Games 3 & 4
|Trading Game Participation (2%)
|Topic 5: Price Formation Process and Public Information ArrivalPre-recorded lecture + in-class lecture/workshopTutorial: Trading Games 5 & 6
|Trading Game Participation (2%)
|Topic 6: Adverse Selection and Trading (Part I)Pre-recorded lecture + in-class lecture/workshopTutorial: Trading Games 7 & 8
|Trading Game Participation (2%)WATTLE Quiz I (20%)
|Topic 7: Adverse Selection and Trading (Part II)Pre-recorded lecture + in-class lecture/workshopTutorial: Trading Games 9 & 10
|Trading Game Participation (2%)
|Topic 8: Impact of Trading Rules and Market Fragmentation on Trading OutcomesPre-recorded lecture + in-class lecture/workshopTutorial: Trading Games 11 & 12
|Trading Game Participation (2%); The top (20%) performing students in these trading games will earn 5 participation marks. The mechanism for determining the top students will be discussed in lectures and outlined on WATTLE.
|Topic 9: Liquidity, Benchmarking and Execution CostsPre-recorded lecture + in-class lecture/workshopTutorial: Tutorial Questions
|Trading report (20%)
|Topic 10: Pricing DiscoveryPre-recorded lecture + in-class lecture/workshopTutorial: Tutorial Questions
|Topic 11: On the Mind of InvestorsPre-recorded lecture + in-class lecture/workshopTutorial: Tutorial Questions
|Mock oral exam (5%)
|Topic 12: Dark side of Trading, and Futures of TradingPre-recorded lecture + in-class lecture/workshopTutorial: Tutorial Questions
|WATTLE Quiz II (20%)
MyTimetable: ANU utilises MyTimetable to enable students to view the timetable for their enrolled courses, browse, then self-allocate to small teaching activities / tutorials so they can better plan their time. Find out more on the Timetable webpage (https://www.anu.edu.au/students/program-administration/timetabling)
|Return of assessment
|Trading Game Participation (10%)
|WATTLE Quiz I (20%)
|WATTLE Quiz II (20%)
|Trading Report (20%)
|Mock oral exam (5%)
|Oral exam (25%)
* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details
ANU has educational policies, procedures and guidelines , which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Integrity Rule before the commencement of their course. Other key policies and guidelines include:
The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the Academic Skills website. In rare cases where online submission using Turnitin software is not technically possible; or where not using Turnitin software has been justified by the Course Convener and approved by the Associate Dean (Education) on the basis of the teaching model being employed; students shall submit assessment online via ‘Wattle’ outside of Turnitin, or failing that in hard copy, or through a combination of submission methods as approved by the Associate Dean (Education). The submission method is detailed below.
Moderation of Assessment
Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.
Students are required to go through the pre-recorded videos prior to the 1.5 hour face-to-face lecture sessions. Students are required to actively participate during the lecture session and tutorials. Information regarding enrolments for these options will be provided on Wattle during O-week, prior to the start of the semester.
Any student identified, either during the current semester or in retrospect, as having used ghost writing services will be investigated under the University’s Academic Misconduct Rule. Centrally scheduled examinations through Examinations, Graduations & Prizes will be timetabled prior to the examination period. Please check ANU Timetabling for further information.
The Oral Exam is a hurdle assessment, where that student must obtain at least 50 per cent of the marks available for the Oral Exam in order to pass the course.
Assessment Task 1
Learning Outcomes: 1,2,3
Trading Game Participation (10%)
Students are required to earn participation marks of 10% of the final raw score if they participate in-tutorial trading games. Game performance will be ranked and announced each week from 2023-08-21 to 2023-09-29. The top (20%) performing students in these trading games will earn an additional 5% of the final raw score. The mechanism for determining the top students will be discussed in lectures and outlined on WATTLE.
Assessment Task 2
Learning Outcomes: 1,2,3
WATTLE Quiz I (20%)
The assessment task is worth 20% of the final raw score. Students are required to complete an online quiz via WATTLE on 1 September 2023 (end of Week 6). Access time and duration of the quiz will be announced in the lecture. A mixture of theory and practical (numerical) questions will be asked. Students will need to review and revise all materials from weeks 1-6. Under no circumstances will the students be able to attempt the quiz outside of the allocated time period. Results will be announced the following week. There will be no practice quizzes.
Assessment Task 3
Learning Outcomes: 1,2,3
WATTLE Quiz II (20%)
The assessment task is worth 20% of the final raw score. Students are required to complete an online Quiz via WATTLE on 27 October 2023 (end of Week 12). Access time and duration of the quiz will be announced in the lecture. A mixture of theory and practical (numerical) questions will be asked. Students will need to review and revise all materials from weeks 7-12. Under no circumstances will the students be able to attempt the quiz outside of the allocated time period. Results will be announced the following week. There will be no practice quizzes.
Assessment Task 4
Learning Outcomes: 1,2,3
Trading Report (20%)
The assessment task is worth 20% of the final raw score. Students are required to submit a two-page trading report online via ‘Wattle’. The report must comprise:
- Pre-game strategy comprising a discussion of the trading strategy employed and strategies not employed.
- Reflection of the game experience
- Use of statistical tools / methodologies to analyse the game data and strategy used
- Calculation of profit/loss/Trading cost
Further details of this assessment will be announced in the lecture. No extensions will be permitted. Late submission will not be accepted. Students must complete the assigned tasks by the due date: 06 October 2023 (end of Week 9)
|Excellent (4 marks)
|Good (3 marks)
|Average (2 marks)
|Poor (1 mark)
|None (0 mark)
A. Discussion of the trading strategy employed and strategies not employed
In-depth discussion with clear explanation; Demonstrate an excellent economic reasoning behind the strategy employed and strategies not employed.
Good discussion with clear explanation; Demonstrate good economic reasoning behind the strategy employed and strategies not employed.
Little explanation of strategies employed; Discussion tends toward descriptive; Little discussion of the economic reasoning behind the strategy employed; Fail to discuss why certain strategies not employed in the game.
Poor discussion of the strategies employed; Fail to discuss the economic reasoning behind the strategies; Fail to discuss why certain strategies not employed in the game.
No discussion of strategy employed and strategies not employed.
B. Reflection of the game experience
Critically reflect and perceptively evaluate game experience in light of theories covered in the course; Clear demonstration of critical thinking. Excellent discussion of strategy refinement based on the gaming experience.
Reflect and evaluate game experience with reference to appropriate theory covered in the course, but to varying depth; Demonstration of critical thinking. Some discussion of strategy refinement based on the gaming experience.
Evaluate game experience but against appropriate theory, and tending towards describing rather than reflecting; Little evidence of critical thinking. No discussion of strategy refinement based on the gaming experience.
Discussion of the game experience is purely descriptive; Little evidence of critical thinking. No discussion of strategy refinement based on the gaming experience.
No discussion of the game experience.
C. Use of statistical tools / methodologies to analyse the game data and strategy used
Excellent use of appropriate and advanced statistical tools / methodologies in the analysis.
Good use of appropriate statistical tools / methodologies in the analysis.
Demonstrate use of appropriate statistical tools / methodologies in the analysis.
Use of inappropriate statistical tools / methodologies in the analysis, and often result in incorrect conclusion.
No evidence of any use of statistical tools / methodologies to analyse the game data and strategy used
D. Calculation of profit/loss/Trading cost
All calculations are correct
Most calculations are correct
Some calculations are correct
Most calculations are incorrect.
None of the calculations are correct
E. Writing style / Overall presentation
Excellent presentation. Clear expression, fluent and precise, within word limit, and in the appropriate genre; Grammar, spelling and punctuation are virtually free of errors; appropriate referencing.
Expression is reasonably clear and fluent, within word
limit, and in the appropriate genre; Grammar, spelling and punctuation are mostly free of errors; appropriate referencing.
Expression is somewhat unclear, slightly repetitive, but within word limit; Interspersed with numerous grammatical, spelling and/or punctuation errors; lack appropriate referencing.
Expression is frequently unclear or ambiguous, repetitive, and not always to the point; Frequent grammatical and other errors seriously distract readers; lack appropriate referencing.
Assessment Task 5
Learning Outcomes: 1,2,3,4
Mock oral exam (5%)
The assessment task is worth 5% of the final raw score. Students are required to attend the mock oral exam in order to participate the final oral exam. The mock oral exam is a scheduled 5 minutes practice oral exam which will be arranged via Zoom. The purpose of this practice exam is to assist students to prepare for the final oral exam. The structure of the mock oral exam will be similar to the final oral exam, except that the final oral will be conducted for individual student. A marking Rubric will be available on WATTLE by Week 9.
Assessment Task 6
Learning Outcomes: 1,2,3,4
Oral exam (25%)
The assessment task is worth 25% of the final raw score. A scheduled 15 minutes face-to-face oral exam will be arranged for each individual student via Zoom. Student are required to pass the oral exam in order to pass the course. The exam will cover materials from weeks 1 - 12. To prepare for the oral exam, students are required to read cases which will be uploaded to WATTLE one week prior to the exam. Questions raised during the oral exam may be related to the cases. The exam is a closed book exam, and students are NOT allowed to access to any printed materials or online resources. Cases will be available one week prior to the oral exam, and a marking Rubric will be available on WATTLE by Week 9. This is a hurdle assessment in line with the student assessment coursework policy (see https://policies.anu.edu.au/ppl/document/ANUP_004603). You must get at least 50% in order to pass the entire course.
Oral Exam via Zoom:
- There may be one to two examiners in the virtual room. Students must log-on to Zoom with the assigned link 15 minutes prior to the exam and they will be allocated to Zoom Waiting Room. Students will be "admitted" in time for the examination.
- Students must conduct the exam in a private room (not in public space), and they are not allowed to have a second person in the room.
- Student's FULL name must be displayed on Zoom
- Once admitted, student's ID must be verified at the start of the exam. Verbal consent must be given for permission of recording, and agreed to abide by the examinations policy. The entire exam will be recorded for the purpose of marking and arbitration .
- Students must check if his/her location has a good WIFI or wired internet connection to ensure continuity of the exam.
- Students must ensure the webcam is set up with optimal lighting so that examiners can clearly see the face and able to hear clearly throughout the exam.
- Students are not permitted to use an image as the Zoom background during the exam.
- Students MUST NOT allow to USE WEBCAM TO BROADCAST the exam, and they MUST NOT discuss the exam content with other people until all students have completed their exam.
- The exam is a closed book exam, and students are NOT allowed to access to any printed materials or online resources. For this reason, students' hands must be seen on the camera.
Academic integrity is a core part of the ANU culture as a community of scholars. The University’s students are an integral part of that community. The academic integrity principle commits all students to engage in academic work in ways that are consistent with, and actively support, academic integrity, and to uphold this commitment by behaving honestly, responsibly and ethically, and with respect and fairness, in scholarly practice.
The University expects all staff and students to be familiar with the academic integrity principle, the Academic Integrity Rule 2021, the Policy: Student Academic Integrity and Procedure: Student Academic Integrity, and to uphold high standards of academic integrity to ensure the quality and value of our qualifications.
The Academic Integrity Rule 2021 is a legal document that the University uses to promote academic integrity, and manage breaches of the academic integrity principle. The Policy and Procedure support the Rule by outlining overarching principles, responsibilities and processes. The Academic Integrity Rule 2021 commences on 1 December 2021 and applies to courses commencing on or after that date, as well as to research conduct occurring on or after that date. Prior to this, the Academic Misconduct Rule 2015 applies.
The University commits to assisting all students to understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. All coursework students must complete the online Academic Integrity Module (Epigeum), and Higher Degree Research (HDR) students are required to complete research integrity training. The Academic Integrity website provides information about services available to assist students with their assignments, examinations and other learning activities, as well as understanding and upholding academic integrity.
You will be required to electronically sign a declaration as part of the submission of your assignment. Please keep a copy of the assignment for your records. Unless an exemption has been approved by the Associate Dean (Education) submission must be through Turnitin.
For some forms of assessment (hand written assignments, art works, laboratory notes, etc.) hard copy submission is appropriate when approved by the Associate Dean (Education). Hard copy submissions must utilise the Assignment Cover Sheet. Please keep a copy of tasks completed for your records.
Individual assessment tasks may or may not allow for late submission. Policy regarding late submission is detailed below:
- Late submission not permitted. If submission of assessment tasks without an extension after the due date is not permitted, a mark of 0 will be awarded.
- Late submission permitted. Late submission of assessment tasks without an extension are penalised at the rate of 5% of the possible marks available per working day or part thereof. Late submission of assessment tasks is not accepted after 10 working days after the due date, or on or after the date specified in the course outline for the return of the assessment item. Late submission is not accepted for take-home examinations.
The Academic Skills website has information to assist you with your writing and assessments. The website includes information about Academic Integrity including referencing requirements for different disciplines. There is also information on Plagiarism and different ways to use source material.
Extensions and Penalties
Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure. Extensions may be granted for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.
Distribution of grades policy
Academic Quality Assurance Committee monitors the performance of students, including attrition, further study and employment rates and grade distribution, and College reports on quality assurance processes for assessment activities, including alignment with national and international disciplinary and interdisciplinary standards, as well as qualification type learning outcomes.
Since first semester 1994, ANU uses a grading scale for all courses. This grading scale is used by all academic areas of the University.
Support for students
The University offers students support through several different services. You may contact the services listed below directly or seek advice from your Course Convener, Student Administrators, or your College and Course representatives (if applicable).
- ANU Health, safety & wellbeing for medical services, counselling, mental health and spiritual support
- ANU Access and inclusion for students with a disability or ongoing or chronic illness
- ANU Dean of Students for confidential, impartial advice and help to resolve problems between students and the academic or administrative areas of the University
- ANU Academic Skills and Learning Centre supports you make your own decisions about how you learn and manage your workload.
- ANU Counselling Centre promotes, supports and enhances mental health and wellbeing within the University student community.
- ANUSA supports and represents all ANU students
Health science; Political economy; Market microstructure; Institutional economics; Asset pricing.
Dr Wai Liu
Dr Wai Liu