August 2014Slide 1 Market Structure and Educational Trading Simulations Market structures and IT innovations Traders’ decision problems Transactions cost.

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Presentation transcript:

August 2014Slide 1 Market Structure and Educational Trading Simulations Market structures and IT innovations Traders’ decision problems Transactions cost analysis Market quality assessment Bruce Weber Greg Sipress August 22, 2014

20 new offices, 2 conference rooms 20 PhD workspaces Doubles JPMC Innovation Center capacity Adds:

Wall Street (1988 movie) clip Q: What determines the price of a trade? Answer: Answer: Price = f(I, L, T) Information, Liquidity, Trading and therefore,  P = f(  I,  L,  T) Slide 3

Books Investing for the NEXT 30 MINUTES

Slide 5 Market Structures Order Book, Market Makers, Call Auction, Dark Pools 3 Sources of Orders Informed Is p*>offer or p*<bid? What Drives a Market? Liquidity Order Flow Quotes, Prices, Volume Momentum Is there a trend/ pattern? P* Slide 5

User entering a market order to buy Click to cancel your limit order to buy 22 at Order Book market Ask: 472 offered at Bid for 134 2) P&L 3) VWAP Performance measures 1) Average prices

Market makers quote 2-way prices Position, Long 172 Risk=Average Position Quote-Driven Dealer market

Call Auction market

Dark Pools Un-displayed liquidity With or without price discovery Reference pricing to a displayed market Slide 9

Slide 10 e.g., Midspread match of a seller and a buyer Slide 10

/standAloneStockTrakDyn.jsp Slide 11

Results at end of simulation Best selling performance?

Final Results:

Slide 14 Admin – Setting up a Simulation P* changes but no stories Select a market structure

Shift P* up or down Control Panel: Instructor’s view of market during run Control the speed of the clock Control Panel tab Send updates

The End Understanding trading in today’s market environments Slide 16