BUSINESS SCHOOL

Version: 2013 Business School 1

Unit of Study Outline
Unit Code FINC3014
Unit Title Trading and Dealing in Security Markets
Semester 2, 2013
Pre-requisite Units: (FINC2012 or FINC2002) or (FINC2013 or FINC2003) or (FINC2014 or FINC2004)
Co-requisite Units: N/A
Prohibited Units: FINC3004
Assumed Knowledge and/or Skills: Students must have a good understanding of corporate finance
Unit Coordinator: Reuben Segara
Address: Room 447, The Business School Building(H69), The University of Sydney NSW 2006
Email: reuben.segara@sydney.edu.au
Phone: 9351 8790
Consultation Hours: Please go to Blackboard for details of all staff consultation times.
Class Day(s): Please go to Blackboard for class times and locations
Required Text / Resources:
Financial Trading and Investing, by John L. Teall, Academic Press, ISBN 0123918804
This Guide to Unit Learning Content and Assessment MUST be read in conjunction with the Business School
Student Administration Manual for information about all processes
(sydney.edu.au/business/currentstudents/student_information/student_administration_manual) and the
Business School unit of study common policy and implementation information that apply to every unit of study
offered by the Business School (http://sydney.edu.au/business/currentstudents/policy). In determining
applications and appeals relating to these matters it will be assumed that every student has taken the time to
familiarise themselves with these key policies and procedures.
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1. Unit of study information
This unit is concerned with the processes which turn orders into trades in securities markets, and the
forces which mould and affect both order flow and order execution. The unit is an introduction to some
fundamental market design and structure ideas. At the end of the unit, students should be able to
understand (1) how the international markets for foreign exchange, swaps, bonds and equities are
organised, (2) how trading is conducted in these markets and how these transactions are cleared, (3)
how the markets are regulated, if they are supervised and what risks different counterparties face in
these markets. The unit aims to equip students to independently analyse international investment and
financing alternatives and to estimate expected returns and costs taking into account liquidity risk, price
volatility and credit risk.
2. Program learning outcomes
Business Knowledge: Our Bachelors programs develop each graduate to be adept in identifying 1.
and understanding major commercial trends both locally and globally leading to students who are
able to demonstrate an understanding of the key challenges in managing business in a range of
business and cultural contexts.
Critical Thinking: Our Bachelors programs develop each graduate to be a critical thinker and 2.
discerning decision maker leading to students who are able to solve business problems by
identifying and critically evaluating implications of business decisions from a range of disciplinary
business perspectives.
Business Analysis and Problem-Solving: Our Bachelors programs develop each graduate to be a 3.
capable business analyst and problem-solver leading to students who are able to analyse and
diagnose business problems and design a range of business improvements that can result in
significant business process improvement and/or the exploitation of advanced information and
communications technologies.
Communication: Our Bachelors programs develop each graduate to be an effective and 4.
professional business communicator leading to students who are able to communicate effectively,
both orally and in writing, using a range of modes of communication including business reports and
presentations and including the ability to negotiate and persuade in a business context.
Team Working: Our Bachelors programs develop each graduate to be an effective team member in 5.
a variety of business contexts leading to students who are able to collaborate effectively with others
in a professional business manner as both members and leaders of teams, and in relation to client
interactions.
Ethical and Social Responsibility: Our Bachelors programs develop each graduate to be an 6.
ethically- and socially-responsible professional leading to students who are able to demonstrate an
understanding of pertinent moral, ethical and corporate social responsibility considerations and the
potential impacts (positive and negative) that business decisions can have on a range of stakeholder
groups.
3. Unit learning objectives
At the successful completion of the unit students should be able to:
- Identify the processes by which security prices come about, why trading occurs and how trading is
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conducted
- Discuss how financial decisions by corporations turn into trades that move prices in exchanges
- Connect the theory of corporations to the visible financial market news in the media
- Put your own trading strategies into practice and evaluate them with the aid of a real-time trading
simulator.
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4. Assessment
Assessment Name Work Type
Program Learning
Outcomes
Assessed
Length Weight Due Date Closing Date
Oral presentation Group 1, 2, 4 15 minutes 10% Weekly Weekly
Mid-semester exam Individual 1, 2, 3 n/a 20% 17-Sep-2013 17-Sep-2013
Rotman Interactive Trader (RIT)
assignment
Individual 2, 3, 4 6 A4 pages 20% See BB See BB
Final exam Individual 1, 2, 3 n/a 50% Final Exam Period Final Exam Period
Academic Honesty Week 4
All Assessments are Compulsory. This means you must undertake all assessments. If you do not
undertake a particular assessment you will receive zero for that assessment.
** Students must complete the Academic Honesty module in Blackboard with a mark above 80% by the
final day of exam, or an Absent Fail (AF) grade will be given for the entire unit. Students can complete the
module multiple times until this grade is achieved. Students who completed the module with a score of
80% or above in any previous semesters do not need to do it again.
*** The due date for an assessment is the last day on which you can submit the assessment without
penalty. If you submit the assessment after that date, you will receive a late penalty, unless excused by
special consideration, special arrangement or disability services adjustment. The closing date is the last
day on which an assessment will be accepted for marking. A task occurs over a number of weeks, e.g.
class presentations, due and closing date are both the first occasion of the task.
Conditions of Assessment
The Business School has standard conditions governing assessments such as late penalties, word
length and so on. Please go to the Business School policy and implementation information at
http://sydney.edu.au/business/currentstudents/policy
Referencing Style
Students should adhere to the Business School Referencing Guide at
http://sydney.edu.au/business/reference_guide
Assessment details
Oral presentation
Task Description
G
All students are required to give a 15 minute presentation to the class on set journal article, which
relates to the unit of study material for that week. The purpose of this assessment is to encourage you
to read academic papers and be aware of how the material you are learning relates to the real world.
Your presentation must not exceed the time limit. Tutors will stop your presentation after 15
minutes! Keeping your presentation short and succinct is an important skill to learn. These
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presentations will be given in the first (or last) 15 minutes of class during weeks 3 to 13. It is
imperative that all presenters are professional, prepared and on time!
Each oral presentation will be completed in a group of at least 2 students. All group members must be
in the same tutorial and equally contribute in their oral presentation. You are required to provide
copies of the article and summaries of your presentation (1 page limit), which you plan to discuss to
all students in your tutorial in the week of your presentation. All students are expected to ask
questions to the presenters and/or to constructively critique their presentation. Being able to
contribute to group learning and solving problems with others is an attribute employers value highly.
Assessment Criteria
G
Oral presentations will be assessed using the following criteria:

- Relevance of the article to the course material
- Level of interest in the topic
- Quality of the analysis
- Quality of the presentation
- Appropriate use of available multimedia
- Familiarity with the content of your presentation
- Ability to meet the time limit
Other Information
G
Your tutor will allocate a presentation date to you in your first tutorial (Week 2). You must provide your
tutor with a completed individual cover sheet on the day of your presentation. This individual cover
sheet is provided on Blackboard. The grades for your oral presentation will be placed on
Blackboard at the end of week 13.
Mid-semester exam
Task Description
G
The mid-semester exam will be held during the lecture in week 8 (16/09/13). All lecture / readings
/tutorial material from Weeks 1-6 inclusive are examinable.
Assessment Criteria
G
To perform well in the mid-semester exam, you will need to (i) have a thorough understanding of how
markets are organised and the regulations that govern them; (ii) be familiar with the different trading
protocols and the pricing mechanisms for securities; and (iii) understand all the issues and main
findings of literature discussed in the classroom.
Other Information
G
The format of the exam will be of a multiple choice variety. During the mid-semester exam you must
display your student ID card on your desk. The only other material you are allowed on your desk is a
pen, pencil, an eraser and a calculator. Mid-semester test details will be posted on Blackboard in the
week prior to the test.
Rotman Interactive Trader (RIT) assignment
Task Description
G
Details of the Rotman Interactive Trader (RIT) assignment will be made available on Blackboard. RIT
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is an application that simulates a stock exchange and allows users to transact financial securities with
each other on a real-time basis. The user-friendly and transparent interface has been designed
specifically to facilitate the learning experience. Users will be able to see each step of transaction
process occur as they submit their orders to the market and trade with one another. Under the control
of an instructor, datasets for different trading games can be loaded.
Assessment Criteria
G
All RIT trading games will be associated with a short-assignment question that will require you to
analyse your trades and quotes, and explain them in relation to theory and practice. The first RIT
session is aimed to familiarise you with the RIT software (nb. more information will be provided on
Blackboard). Two trading games will be run for the remaining RIT sessions. The games used will
allow students to understand a number of market microstructure concepts discussed in lectures and
classes, which will form part of your assessment.
Other Information
G
RIT sessions will form part of 3 to 4 tutorials and will be held in the computer labs. Each student will
be randomly assigned to a computer lab on a particular day in replacement of their normal tutorial for
that week.
Final exam
Task Description
G
The final exam will be held during the University Examination period with the date, time, and location
to be advised by the Examinations Centre. The exam will be two (2) hours, thirty (30) minutes
closed-book exam, plus an additional ten (10) minutes reading time only. The final exam may
comprise of a combination of multiple choice, short answer, problem solving and discussion questions.
It will cover all material included in the unit of study.
Assessment Criteria
G
To perform well in the final exam, you will need to: (i) accurately interpret the questions and identify
the central issues being asked; and (ii) have a thorough understanding and knowledge of all the
material covered from Week 1 to Week 13 inclusive.
Other Information
G
Further information will be provided in the lectures in Week 13 and on Blackboard. No early exams
will be given under any circumstances.
5. Other suggested resources for students
All lectures and seminars are recorded and will be available within Blackboard for student use. Please
note the Business School does not own the system and cannot guarantee that the system will operate
or that every class will be recorded. Students should ensure they attend and participate in all classes.
Additional recommended texts
Trading & Exchanges, Market Microstructure for Practitioners, by Larry Harris, Oxford University
Press, ISBN 0-19-514470-8, 2003
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Equity Markets in Action The Fundamentals of Liquidity, Market Structure and Trading, by
Robert A. Schwartz, John Wiley & Sons, ISBN 9780471469223, 2004
Trade Execution, Arbitrage and Dealing in Australia, by Alex Frino and Reuben Segara, Pearson
Education, ISBN 978 1 4425 0539 1, 2008
Blackboard and other electronic sites
This unit will make extensive use of Blackboard. All major announcements will be made using
Blackboard. Lecture notes and tutorial solutions will be posted on Blackboard. Please note that
Blackboard is not a substitute for lectures or lecture content.
6. Feedback and improvements made in response to feedback
The Business School seeks feedback from students and staff in order to continually improve and
innovate all units offered. For information on previously collected feedback and innovation made in
response to feedback, please see
http://sydney.edu.au/business/learning/planning_and_quality/feedback/student
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7. Unit schedule
Week/
Topic
Materials (e.g.
readings)
Lecture/Seminar/Problem
Based Learning Session
Tutorial/Lab/Workshop
Assessments
Due
1
29 Jul
2013
Teall, Chapter
1
Introduction
2
5 Aug
2013
Teall,
Chapters 1 & 2
Part I: The Structure of Trading see Blackboard
3
12 Aug
2013
Teall,
Chapters 1,2 &
3
Part II: The Structure of Trading see Blackboard
4
19 Aug
2013
Teall, Chapter
10
The Benefits of Trade /
Behavioural Finance concepts
see Blackboard
Rotman Trading
Lab
5
26 Aug
2013
Teall, Chapter
5
Liquidity traders see Blackboard
6
2 Sep
2013
Teall, Chapter
12
Informed Traders see Blackboard
Rotman Trading
Lab
7
9 Sep
2013
see
Blackboard
Measurements of liquidity and
volatility
see Blackboard
8
16 Sep
2013
see
Blackboard
No lecture (mid-term exam in
lecture)
see Blackboard
Mid-term exam
held in lecture
(17/09/13)
9
23 Sep
2013
Teall, Chapter
9
Transaction costs analysis (TCA) see Blackboard
Rotman Trading
Lab
Common week 30 to 6 Oct
10
7 Oct
2013
Teall,
Chapters 6 &
11
Market efficiency / Consolidation
vs. Fragmentation
see Blackboard
11
14 Oct
2013
Teall,
Chapters 6 & 7
Arbitrage and Hedging see Blackboard
Rotman Trading
Lab
12
21 Oct
2013
see
Blackboard
Market abnormalities (Bubbles,
Crashes, Insider trading)
see Blackboard
13
28 Oct
2013
see
Blackboard
Review see Blackboard