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Trading and Exchanges: Market Microstructure for Practitioners
This book is about trading, the people who trade securities and contracts, the marketplaces where they trade, and the rules that govern it. Readers will learn about investors, brokers, dealers, arbitrageurs, retail traders, day traders, rogue traders, and gamblers; exchanges, boards of trade, dealer networks, ECNs (electronic communications networks), crossing markets, and pink sheets. Also covered in this text are single price auctions, open outcry auctions, and brokered markets limit orders, market orders, and stop orders. Finally, the author covers the areas of program trades, block trades, and short trades, price priority, time precedence, public order precedence, and display precedence, insider trading, scalping, and bluffing, and investing, speculating, and gambling.
656 pages, Hardcover
First published September 30, 2002
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Displaying 1 - 24 of 24 reviews
September 1, 2018
T&E is the bible of market microstructure. It's also a sobering reminder of why most people can't even begin to imagine why they can't compete in modern markets and why Flash Boys succeeded as a mass-market novel but failed as a criticism of the industry. Whether you care about regulation, making money, or the efficiencies of capitalistic societies (aren't all of these the same thing?), this book has something for you.
I work in the industry and have finally completed reading the book from front to back. It's important, nay, essential, in honing one's mastery of the environment we're in. As I glance back at the Wall Street novels I have enjoyed and the hundreds of Bloomberg articles I've now torn through, I really wish I had made an effort to read this book sooner. The breadth and depth of information are staggering. It's outdated in some parts, but the core concepts are totally relevant and still very much foundational. When people call it outdated they are more than likely talking more about the Bernie Madoff sections.
It's also dry, which is a good natural sleep aid. When you're trying to fall asleep, that is. If I didn't have industry experience I'd have found it hard to connect the dots in places, but whether a reference book or a primer for the newly-hired, it's essential, your feelings about books termed bibles notwithstanding.
The topic of a rewrite is a difficult one to approach. All major players in the markets must be making their employees read this. Either that, or they maintain internal docs that paraphrase the most important parts and provide more insights. The point is that it's still super usable even though it feels old. Would it be worth the author's time to slim it down a little and update it? I'm not sure.
See this review and others on my blog
I work in the industry and have finally completed reading the book from front to back. It's important, nay, essential, in honing one's mastery of the environment we're in. As I glance back at the Wall Street novels I have enjoyed and the hundreds of Bloomberg articles I've now torn through, I really wish I had made an effort to read this book sooner. The breadth and depth of information are staggering. It's outdated in some parts, but the core concepts are totally relevant and still very much foundational. When people call it outdated they are more than likely talking more about the Bernie Madoff sections.
It's also dry, which is a good natural sleep aid. When you're trying to fall asleep, that is. If I didn't have industry experience I'd have found it hard to connect the dots in places, but whether a reference book or a primer for the newly-hired, it's essential, your feelings about books termed bibles notwithstanding.
The topic of a rewrite is a difficult one to approach. All major players in the markets must be making their employees read this. Either that, or they maintain internal docs that paraphrase the most important parts and provide more insights. The point is that it's still super usable even though it feels old. Would it be worth the author's time to slim it down a little and update it? I'm not sure.
See this review and others on my blog
September 26, 2009
This is an exceptionally dry, boring book, but it is one of the only ones out there on an increasingly important topic: market microstructure. It is thorough and precise, and more or less devoid of fluff. This material is the pipes and sewers of the industry, and as such it affects the execution of every trade on every exchange. Not just for market makers and employees of Getco and Rentech, this should be required reading for anyone for whom execution matters (and who doesn't want to get picked off by the aforementioned Getco and Rentech). Knowing the difference between a "fill-or-kill" and a "market-if-touched" hasn't been enough for a long, long time...dry or otherwise, you should read this book.
June 6, 2019
Provides a good structured perspective on viewing different market participants and what they contribute. Occasionally feels a little dated at this point (especially references to Bernard Maddoff Securities being a reliable shares dealer)
May 8, 2021
Make no mistake, this book is more of a textbook than a casual read. If you expect yourself to engage in some light reading and at the same time learn about the stock markets, you are terribly wrong. I am in no way saying that this book is poorly written but the nature of the content makes the book unavoidably boring. If I were to describe book with a place, it would be the 'Sahara Desert', because it is dry as hell.
However, this book provides great value to readers interested in understanding the stock market structures. There are ample examples provided in this book which clearly shows the author's depth in the subject matter. Given that this book is written a decade ago, there is information about how the stock markets traded in the previous era where people go around to collect bid/ask orders from the traders to facilitate trades. It was eye-opening to me as I had little knowledge about the differences between order driven markets and quote driven markets.
For an amateur trader like me, I appreciate the content written in this book and no doubt it would help me in performing technical analysis on the stocks. Understanding the market microstructure is essential for market makers and highlights certain things I need to be clear of during trading. For retail investors, reading this book might be an overkill and you are better off watching videos on YouTube.
However, this book provides great value to readers interested in understanding the stock market structures. There are ample examples provided in this book which clearly shows the author's depth in the subject matter. Given that this book is written a decade ago, there is information about how the stock markets traded in the previous era where people go around to collect bid/ask orders from the traders to facilitate trades. It was eye-opening to me as I had little knowledge about the differences between order driven markets and quote driven markets.
For an amateur trader like me, I appreciate the content written in this book and no doubt it would help me in performing technical analysis on the stocks. Understanding the market microstructure is essential for market makers and highlights certain things I need to be clear of during trading. For retail investors, reading this book might be an overkill and you are better off watching videos on YouTube.
November 14, 2020
Informative and must read for full time market participents.
March 22, 2024
4.5/5
Never have I learnt so much about the markets than I have through this book.
From the most granular topics like the origins of liquidity and volatility to the broad but pivotal study of how to assess trader performance, this book provides the most comprehensive overview of financial markets that I have ever seen. Harris has produced a true hallmark in trading literature, which is as comprehensive as it is well-researched.
If you choose to pick up this book, be prepared to dive deep. Harris begins the book with the ‘basics,’ outlining who the major players are, their role in the markets, and the types of markets out there. For the retail trader, this is a great introduction to both the players around you and to the environment you are playing in. The mechanics of trading — especially the types of orders, conditional orders and how they’re used — are essential knowledge for the up-and-coming trader, which is probably the most important chapter in this introduction.
The book later dives into the ‘heavy hitters.’
The chapter on Informed Trading and Market Efficiency is a must, as it clearly explains what it takes to be a profitable trader. After reading the chapter, you come away with a clear understanding that the market is a fierce competition. You compete, primarily, for information, but also speed, stealth and strategy. This concept can be lost on the remote trader, who sees trading solely as a battle against himself and the abstract ‘market.’
The chapter on liquidity suppliers is an eye-opener. When you’re on your computer staring at the order book of ticker XYZ, it’s difficult to visualize just how many operators are working to provide traders with *depth, breadth and immediacy* (if you don’t know what those are, read the book!) The chapter on dealers was illuminating and provided much context for their importance and why when people say ‘trader’ in professional environment they typically mean a dealer/market-maker.
At the end of the book, Harris discusses evaluation and prediction, which, for me, is the most important part of this book along with the Informed Trading and Market Efficiency chapter. Market participants, particularly retail traders, do not understand how much randomness exists in trading results and how hard it is to beat market indices on a consistent basis. Did you know that Warren Buffet, the greatest investor of our time, has realized average *market-adjusted returns* (if you don’t know what that means, read the book!) of just 7 to 11%? The superstar of the investing world beats the market on average by 7 to 11%! When you first start trading, you have all these expectations that you’re going to be a gazzilionaire in 2.5 seconds, but in truth, trading is one of the hardest ways to get very rich.
I’ve just spent a lot of time propping up this book, and it deserves every letter of praise. Truly outstanding in its depth and breadth and incomparable to anything I have ever come across. BUT, please manage your expectations.
1. This is NOT a fun read. If you find markets interesting, it might be fun for you, but I think even market enthusiasts will struggle reading through some of the chapters.
2. This is NOT the book that makes you into a trader. In fact, no book will make you into a trader. This is also probably not the book that helps you find your edge.
If you’re expecting to come out of this with some trading strategy that will make you millions, you are going to be very disappointed. If you’re a true aspiring professional — if you truly care about the markets and doing everything you can to learn as much as you can about them — then this is a must-read.
Recommended to me by Adam Grimes.
Never have I learnt so much about the markets than I have through this book.
From the most granular topics like the origins of liquidity and volatility to the broad but pivotal study of how to assess trader performance, this book provides the most comprehensive overview of financial markets that I have ever seen. Harris has produced a true hallmark in trading literature, which is as comprehensive as it is well-researched.
If you choose to pick up this book, be prepared to dive deep. Harris begins the book with the ‘basics,’ outlining who the major players are, their role in the markets, and the types of markets out there. For the retail trader, this is a great introduction to both the players around you and to the environment you are playing in. The mechanics of trading — especially the types of orders, conditional orders and how they’re used — are essential knowledge for the up-and-coming trader, which is probably the most important chapter in this introduction.
The book later dives into the ‘heavy hitters.’
The chapter on Informed Trading and Market Efficiency is a must, as it clearly explains what it takes to be a profitable trader. After reading the chapter, you come away with a clear understanding that the market is a fierce competition. You compete, primarily, for information, but also speed, stealth and strategy. This concept can be lost on the remote trader, who sees trading solely as a battle against himself and the abstract ‘market.’
The chapter on liquidity suppliers is an eye-opener. When you’re on your computer staring at the order book of ticker XYZ, it’s difficult to visualize just how many operators are working to provide traders with *depth, breadth and immediacy* (if you don’t know what those are, read the book!) The chapter on dealers was illuminating and provided much context for their importance and why when people say ‘trader’ in professional environment they typically mean a dealer/market-maker.
At the end of the book, Harris discusses evaluation and prediction, which, for me, is the most important part of this book along with the Informed Trading and Market Efficiency chapter. Market participants, particularly retail traders, do not understand how much randomness exists in trading results and how hard it is to beat market indices on a consistent basis. Did you know that Warren Buffet, the greatest investor of our time, has realized average *market-adjusted returns* (if you don’t know what that means, read the book!) of just 7 to 11%? The superstar of the investing world beats the market on average by 7 to 11%! When you first start trading, you have all these expectations that you’re going to be a gazzilionaire in 2.5 seconds, but in truth, trading is one of the hardest ways to get very rich.
I’ve just spent a lot of time propping up this book, and it deserves every letter of praise. Truly outstanding in its depth and breadth and incomparable to anything I have ever come across. BUT, please manage your expectations.
1. This is NOT a fun read. If you find markets interesting, it might be fun for you, but I think even market enthusiasts will struggle reading through some of the chapters.
2. This is NOT the book that makes you into a trader. In fact, no book will make you into a trader. This is also probably not the book that helps you find your edge.
If you’re expecting to come out of this with some trading strategy that will make you millions, you are going to be very disappointed. If you’re a true aspiring professional — if you truly care about the markets and doing everything you can to learn as much as you can about them — then this is a must-read.
Recommended to me by Adam Grimes.
September 20, 2017
Essential reading for any trader.
March 31, 2020
Foundational book for understanding markets and exchanges.
Must-read for traders, very instructive, well-written and more entertaining than thought.
Must-read for traders, very instructive, well-written and more entertaining than thought.
March 11, 2021
Very dry, but essential microstructure reading
December 25, 2021
This is one single book that I wish someone had recommended to me three years ago as I started my career in finance.
September 29, 2022
The single greatest resource on the topic.
March 5, 2023
Long, boring book that at this point is a bit dated. BUT, it remains one of the few in depth and complete (as it could be) sources of trade processing, trade life cycle, and all the relevant parties.
September 3, 2023
Old but gold.
July 18, 2011
This book is a little dated (2002), but is a good read for anyone interested in understanding the way some of our markets work or why and how traders trade. Very little about high frequency trading in this book, as it was pretty new at the time. I'd rate the book higher if it was updated.
January 8, 2009
If you want a complete understanding of how and why financial markets work, this is the book for you. Its surprisingly readable, and fairly light on the math.
May 16, 2009
Great book--comprehensive and entertaining! Highly recommended for those who want to learn about trading, exchanges and market structure.
December 30, 2009
Amazing treatment of the financial markets and what makes them tick.
January 20, 2011
So dry! No idea why people like this book.
June 4, 2013
The best book you can read to understand (microstructure of) financial markets. I also recommend his papers.
January 4, 2013
in my opinion the best book in market microstructure
November 3, 2013
Clearly written and comprehensive. A bit dated in its description of some particulars of the markets but fundamentally sound.
February 10, 2014
A must-read for any serious investor.
April 17, 2014
This book explains in detail exactly how exchanges function. I was surprised by how much I learned about a topic that I thought I knew well.
April 30, 2016
If you're interested in trading and capital markets, market microstructure is important.
Displaying 1 - 24 of 24 reviews