1. 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

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

3. 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

4. Books 2006 2010 Investing for the NEXT 30 MINUTES

5. 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

6. User entering a market order to buy Click to cancel your limit order to buy 22 at 19.60 Order Book market Ask: 472 offered at 20.20 20.00 Bid for 134 2) P&L 3) VWAP Performance measures 1) Average prices

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

8. Call Auction market

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

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

11. http://69.89.12.199:8080/StandAlone /standAloneStockTrakDyn.jsp Slide 11

12. Results at end of simulation Best selling performance?

13. Final Results:

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

15. 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

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