Syllabus for FINC-UB.0049 Principles of Securities Trading, Fall 2022

Last updated on Monday August 29, 2022 1:22 PM

Tentative topics and schedule (subject to further revision)

For currently enrolled students, updated materials and announcements will be posted to the NYU Brightspace page for the class.

Professor Joel Hasbrouck


Most finance courses describe 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, derivatives and cryptocurrencies vary in sophistication and complexity. For some securities, the market has evolved to an anonymous network that offers very high levels of access and transparency. At the other extreme we have markets where one or more traders act as a dealer, and reputation and relationship are very important. 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 progress toward this goal is rough and uneven. 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 subfield of financial economics known as market microstructure.


Classes are in-person and attendence is required. I usually make powerpoint handouts available on Brightspace prior to the class. I also make available the class videos (subject to everything working on the technical side).

Workload and deliverables

There will be a midterm and a final exam. Both are in-class, closed-book and closed-notes. Both will be a mix of multiple choice and short-answer/essay problems covering material from class sessions, readings, and trading exercises. Note: Finals week runs from Friday Dec 16 toThursday, Dec 22. The NYU registrar sets the final schedule within this window. Do not make travel plans that might conflict with this schedule. In addition to the exams there will be five or six trading exercises.

Trading Exercises

In each trading exercise, you'll assume the role of some type of trader (a dealer, an information trader, a hedger, an arbitrageur, for example). You'll buy and sell securities in a market populated by you, your classmates, me (sometimes), and simulated traders.

Most of the exercises will use the Rotman Interactive Trader (RIT) system. The market resides on an RIT server. You'll access the market via the RIT client, which runs locally (on your own computer). The client simulates a very realistic trading interface, similar to what you might get from an institutional or sophisticated retail broker. If you want an advance look at the client, go to and then to the "Demo" page.

Each RIT exercise will run continuously for several days: you can trade in multiple sessions (as many as you like). The runs are scored on profits, hedging error, and so forth, depending on your role in the market. The scoring usually works like this. You can get a passing grade (75%) simply by playing three times. Then I factor in the average of your three best runs. For purposes of numerical averaging, the top score is typically capped at 85%. (Once you've learned the basic principle of an exercise, you can often make arbitrarily high profits by repeatedly playing many times, well beyond the point of any educational value.

The trading exercises are simulations designed to illustrate how markets work, and to allow you to successfully act out your designated role. It is not difficult to make (simulated) profits in these exercises. Real markets are much less forgiving. Their workings are often unclear; they are populated by traders who are trying to make money at our expense; and even traders who make money are running large risks. I can't teach you how to be lucky.

Final grade weightings

The overall grade weightings will be (approximately) 35% midterm, 45% final, 20% on the trading exercises.


Material required/recommended by the Stern School/New York University is an essential part of this syllabus. It is posted here and is incorporated by reference.

For this class, the required/recommended material is modified as follows