FINC-UB.0049 Principles of Securities Trading, Spring 2015

Last updated Sunday, May 17, 2015 1:05 PM

Class meets Tu, Thu, 2:00-3:15 PM in KMEC 5-90

Active Syllabus (Topics and Schedule)

Professor Joel Hasbrouck

Office hours: Tuesday, Thursday 3:30-4:30pm, MEC 9-88.


Video links are automatically posted to the class page in NYU CLASSES.


Most finance courses focus on how securities are defined, valued and used. This course is about how securities are traded: the design, operation and regulation of trading processes, mechanisms and protocols. Today's markets for stocks, bonds, and derivatives span a wide range in sophistication and complexity. For some securities, the market has evolved to an integrated network that offers very high levels of access and transparency. At the other exteme we have markets that operate as small dealer networks sustained by reputation and relationship. Some mechanisms are new (the open electronic limit order book); some are as old as antiquity (the single-price call auction). We have a general sense that all markets are heading toward some sort of electronic future, but the speed of progress and convergence varies widely. Our markets are infused with tensions between efficiency and fairness, competition and regulation, consolidation and fragmentation, speed and stability, and so on.

The course is based on a realistic picture of the trading process, so we go into a fair amount of insitutional detail, as well as some law and market regulation. The intellectual framework for the material comes from mainstream economics, financial economics, and the newer subfield of financial economics known as market microstructure.

Workload and deliverables

The course requirements will involve a mix of midterm and final exams, one or more data analysis projects, and participation in trading exercises.

Some of the trading exercises are involve face-to-face non-automated trading. (I usually set up a floor market in Kryptonite futures contracts.) Most present day trading takes place on computers, though, and so too are most of the exercises.

School and departmental grading standards

Other policies

NYU/Stern policies on Academic Integrity, General Conduct & Behavior, Students with Disabilities, and related matters are posted at Unless otherwise stated, these should also be considered policies for this course.


Topics and schedule

Date Day Session Topics/readings/materials/assignments
1/27/2015 Tue 1 NYU Closed. No class.
1/29/2015 Thu 2

Intro (STPP 1); Overview of US Eq Mkts (STPP 2); Class notes; the STPP readings are posted to Securities Trading: Procedures and Principles (STPP). Problems and exercises are in STPP Problems and Exercises.

2/3/2015 Tue 3

Limit order mkts (STPP 3); Multiple markets (STPP 4); Class notes.
Bargaining game (V) Notes on how to play; Discussion of bargaining game (notes);

2/5/2015 Thu 4

Limit order markets (continued); Multiple Mkts (STPP 4); Introduction to floor market trading game

2/10/2015 Tue 5 Floor market trading game (no computer necessary on this one.) In lieu of our regular class, we're running three separate trading sessions (A, B, C). You should have received an email with the details.
2/12/2015 Thu 6 Multiple markets (continued); Introduction to TAQ exercise, Part I (Trades and Quotes); Veconlab double-auction notes.
2/17/2015 Tue 7 Auctions (STPP 5); Auction class notes We'll be playing the Veconlab double-auction game. Bring an internet-enabled laptop. It does not have to be a Windows machine.
2/19/2015 Thu 8

Auctions, continued; SEC Administrative Proceeding re the Facebook IPO.

2/24/2015 Tue 9 Dealers (STPP 6); Dealer markets class notes; RIT Intro class notes Also see the Stern RIT page.
2/26/2015 Thu 10 Dark trading (STPP 7); Dark trading class notes. TAQ Excercise Part I (Trades and Quotes) due.
3/3/2015 Tue 11 Dark trading (continued); Trading costs (STPP 8); Trading Costs class notes
3/5/2015 Thu 12 Trading Costs (continued)
3/10/2015 Tue 13 Midterm review. Marked-up pages
3/12/2015 Thu 14 Midterm exam; closed book, closed notes.
3/17/2015 Tue NC  
3/19/2015 Thu NC  
3/24/2015 Tue 15

Public information. Class notes on public information

Readings: STPP 9.

3/26/2015 Thu 16

Public information; Market efficiency and securities class actions. Class notes on securities class actions ("ROKA", revised); Spreadsheet dsfSubset.xls (revised to include SNY)


  • Fischel, Daniel R. (1982). Use of modern finance theory in securities fraud cases involving actively traded securities. Business Lawyer, 38(1), 1-20.

Case: Wei Ding v. Roka Bioscience. (2014). Initial complaint.

3/31/2015 Tue 17

Market efficiency and class actions, continued. Class handouts: Sanofi

RIT trading exercise F1

Case: Joel Mofsenson v. Sanofi (2014). Initial complaint.

Supplementary reading

4/2/2015 Thu 18 Private information (STPP 9). Class notes on private information


4/7/2015 Tue 19 Regulating insider trading; Class notes on insider trading regulation


4/9/2015 Thu 20 Regulating Insider trading, cont'd; PD0 RIT game.
4/14/2015 Tue 21 PD0 Results; Hedging and risk control, Class notes on static hedging; Spreadsheet H1.xlsx
4/16/2015 Thu 22 In-class trading exercise. Hedging and risk control, cont'd Class notes on dynamic hedging
4/21/2015 Tue 23 Continuing dynamic hedging (with class notes, above)


24 Conditional orders class notes (STPP 11); Dynamic models and order splitting (STPP 12, 13) first part of class notes
4/28/2015 Tue 25

Order splitting and manipulation. Marked-up class notes (these also include some overheads used in the previous class).

Spoofing. Complaint in US v. Navinder Singh Sarao

4/30/2015 Thu 26

Pricing (STPP 14). Marked-up pricing notes; RIT H3 hedging case

5/5/2015 Tue 27

Reg NMS (STPP 15) Marked-up class notes

Reading (required) Text of Reg NMS: Introduction.

Reading (supplementary) SEC Tick Size Pilot Program

5/7/2015 Thu 28 Review; Sample final exam questions and answers.
5/19/2015 Tue Final Exam