Professor Giovanni Cespa, Professor of Finance introduces the module.

Exchange market structures differ across the world. However, they all aim at the same objective, which is to facilitate the efficient allocation of capital to productive activities through (i) the listing of firms’ shares, (ii) the organization of risk transfer via derivatives, and (iii) the dissemination of valuable security information, through the sale of market data. Building on this insight, this module starts by reviewing the main instruments and contracts that are traded in an exchange. It then focuses on the effect that trading rules, market organization and market “frictions” have on securities price formation, measured along the two-standard metrics of market quality: price discovery and liquidity. It finally turns to analyse how such metrics have been impacted by recent trends such as market electronification, and concludes with a discussion of what the future is likely to hold in this respect.