Larry Harris (2008): Trading and Exchanges: Market Microstructure for Practitioners

Article excerpt

Larry Harris (2008)

Trading and Exchanges: Market Microstructure for Practitioners

Oxford University Press, New Delhi

Price: Rs. 395 Pages: 643

Financial economics is the area, where one learns mainly through the journal articles. To my surprise, I turned the pages of this book; I got more and more interested. As J K Galbraith has once said that worth of a book depends on how many pages of are read by the reader? By that formula, I think author has done a commendable job in this book. The book contains 29 chapters divided logically into seven parts. As the name itself suggests, the book is written primarily for the practitioners and hence many readers may find this too technical.

Part--1 deals with the structure of trading. Comparative study of quote driven versus order driven markets have been analyzed. Role of brokers, dealers and market makers have been explained very nicely. Part--II deals with benefits of trade and explains the reasons for trade taking place. Part--III carefully study the various impacts of speculator decisions in the capital market. Part--IV seems to me to be the most important and technical part of the book. It deals with the liquidity suppliers. Bid-ask spread has been explained in a simple manner with complicated models have been explained in separate appendices. Any one not well versed with mathematics may skip the appendices. Part--V deals with volatility problems of the capital markets and Part--VI analysis the forecasting problems. Part--VII deals with latest issues involved in this area. Some of the areas which have been discussed are insider trading, automation of trading exchanges and reasons for bubbles and crashes. …