Preview of Activities

Quiz

This assessment will count towards your individual participation grade

Discussion

Overview of Presenting in a Digital World

Session 3

Evolution of Market Technology & Evaluating Market Quality

After completing the weekly section, you will be able to:

  1. Illustrate the evolution of market technology
  2. Identify the importance of speed in trading
  3. Assess the quality of an electronic market

Evolution of Market Technology

Evolution of Market Technology - Dr. Riordan (Audio Only)

Evolution of Market Technology: Mandatory Readings

Please read the following articles.

  1. The Physical Stock Ticker Is a Relic, But Its Influence Reverberates Loudly Today

Lewis, D. (2016, November 15). The Physical Stock Ticker Is a Relic, But Its Influence Reverberates Loudly Today. Retrieved July 10, 2020 from https://www.smithsonianmag.com/smart-news/the-physical-stock-ticker-is-a-relic-but-its-influence-reverberates-loudly-today-180961092/

  1. History of Financial Markets Infographic

Elliotwavemarkets.com. (n.d.) History of Financial Markets [Digital image]. Retrieved June 23, 2020, from https://ewminteractive.com/wp-content/uploads/2014/08/History-of-Financial-markets.png

  1. Tools of The Trade: An Historical Look at Technology and Commerce

Spicer, D. (2015, October 06). Tools of The Trade: An Historical Look at Technology and Commerce. Computer History Museum. Retrieved July 10, 2020 from https://computerhistory.org/blog/tools-of-the-trade-an-historical-look-at-technology-and-commerce/

  1. Electronic Trading

Pfeffer, I. (n.d.). Electronic Trading. Britannica Book of the Year. Retrieved July 10, 2020 from https://www.britannica.com/topic/Electronic-Trading-1517831

Check Your Understanding

Q1: The earliest electrical communications medium specifically dedicated to the financial sector was the:

a) Transatlantic Telegraph Cable
b) Stock ticker (ticker tape)
c) Stock Exchange Automated Quotation System
d) Intermarket Trading System


Q2: True or False? An Intermarket Trading System is a computerized system that automatically matches buy and sell orders for securities in the market.

a) True
b) False


Q3: True or False? The desire for faster access to market information has been a primary driver for many developments in trading technology.

a) True
b) False


The Importance of Speed - Dr. Riordan

Check Your Understanding

Q: In modern stock exchanges, why has market speed become so important? What factors can give a trader an edge over the competition? Highlight a specific market technology and why it’s important.


Evaluating Market Quality

Measures of Liquidity - Dr. Riordan

Liquidity: Mandatory Readings

Please read the following articles.

  1. Understanding Liquidity Risk

Harper, D. (2020, April 10). Understanding Liquidity Risk. Retrieved June 23, 2020, from https://www.investopedia.com/articles/trading/11/understanding-liquidity-risk.asp

  1. Bid-Ask Spread

Investopedia Staff. (2020, February 05). How to Calculate the Bid-Ask Spread. Retrieved June 23, 2020, from https://www.investopedia.com/articles/investing/082213/how-calculate-bidask-spread.asp

  1. Effective Spread

Cboe Exchange, Inc. (n.d.). Cboe Exchange: Execution Quality Definitions. Retrieved June 23, 2020, from https://certification.batstrading.com/market_data/execution_quality/definitions/

  1. Market depth

Twin, A. (2020, May 29). Depth of Market - DOM Shows Supply and Demand Levels for a Security. Retrieved June 23, 2020, from https://www.investopedia.com/terms/d/depth-of-market.asp

  1. Resilience

Brandao-Marques, L. & Gelos, G. (n.d.). Resilience of market liquidity. Retrieved June 23, 2020, from https://voxeu.org/article/resilience-market-liquidity

Check Your Understanding

Q1: Which measure of liquidity measures the actual cost of a trade?

a) Bid-ask spread
b) Effective spread
c) Market depth
d) Resilience


Q2: If you want to trade a large order all at one time, which variable is going to be the most important to your decision?

a) Bid-ask spread
b) Effective spread
c) Market depth
d) Resilience


Random Walk: Mandatory Readings

Please read the following articles.

  1. Random Walk Theory Definition

IG. (n.d.). Random walk theory definition. Retrieved June 23, 2020, from https://www.ig.com/en/glossary-trading-terms/random-walk-theory-definition

  1. How Can Random Walk Theory Be Applied to Investing?

Phung, A. (2020, April 09). How Can Random Walk Theory Be Applied to Investing? Retrieved June 23, 2020, from https://www.investopedia.com/ask/answers/08/random-walk-theory.asp

  1. Random Walk Theory: A Mathematical Model of the Stock Market

Corporate Finance Institute. (2020, April 22). Random Walk Theory - Definition, History, Implications of the Theory. Retrieved June 23, 2020, from https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/what-is-the-random-walk-theory/

Measuring Price Efficiency - Dr. Riordan

Deliverables

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