Trading and Exchanges: Market Microstructure for Practitioners

I'm not a trader. I do occasionally look longingly at high frequency trading positions (stat arb, automated trading; whatever you'd like to call it). This is the book that actually answers all those questions any curious person who has ever made a trade might ask. What happens when you make a trade? What is the mechanics of making a trade? How does liquidity work? What happens if your trade is bigger than the daily volume of the traded equity? How does index arb work? What do flow traders do to make money? What are the different exchanges, and what are their rules? How does GAAP play out in exchanges? What are NASDAQ's idiosyncrasies? Why don't they have an automated auction model out there (they do)? How do traders scalp you when you want to dump a block on the street? Is this legal? This book answers all, and far more. I don't know how people used to learn this stuff; presumably either by word of mouth, or by losing millions of their employers dollars. I also don't know what motivated Mr. Harris to spill all this wonderful information, but I am very grateful that he did. I almost feel like I should trash talk the book to prevent people from reading it (yeah, some of the information actually is outdated -pffff, like it matters), but enough know of it already I wouldn't gain much edge. The person who recommended this book to me is generally mentioned in the same breath as the name "Jim Simons," so I have to assume it is as accurate as anything on the market out there. Wonderful, wonderful stuff. Anyone interested in markets should read this from cover to cover.

This book's title understates its contents and scope: this is a comprehensive guide to how financial instrument trading works. If you ever wondered what happens when you place an order to sell 10 million shares of GOOG (which you may or may not already own), or what transpires when you try to corner the silver market like the Hunt brothers, you'll find all the details in this book. But it's more than that. For the most part accurate and easy-to-read, the 600-page book also covers issues that are of most importance to traders: where to trade, when to trade, how to trade, and what price to trade at. Very detailed discussions reveal how the various market participants, from exchanges to broker-dealers to moronic traders, fulfill their respective roles in the Great Paper Wealth Game. Entire chapters are devoted to speculators vs. liquidity suppliers. The discussions on how each type of players trade and try to outsmart one another offer terrific insights into the psychology and techniques of market players. Usually tedious topics such as order-matching rules and volatility measures are also covered well here. This is not a book about how to read stock charts or build sophisticated multi-variate GARCH models to predict volatility. It's also not about how you could become a better gambler - the author says the gambler always loses, so you don't have much hope there. This practioner's book is about financial markets and its inner workings and the human beings that drive them. If you want one authoritative reference volume on the mechanics of financial markets, this is it. My only quibble is it's expensive for someone who has to pay for the book out of their own pocket.

I have been trading for 8 years. 6 years prop trading, I now run a hedge fund. We make about 10,000 trades/day. I wish I had read this book years ago. I've had to pay Mr. Market a large sum to learn many of these lessons. Larry Harris has written what I consider to be the best book in the field of trading. He covers nearly all topics, from structural & regulatory issues, to descriptions of the players; costs to performance evaluation. Presentation is excellent - the numerous sidebars, tables & graphs serve to illustrate the text. My only complaint is that the book does not take the quantitative side far enough. I recommend a technical appendix plus specific references (perhaps annotating the excellent bibliography) for the mathematically inclined reader.If you are interested in trading, or curious about the markets, buy and read this book!

If you don't understand how the markets work, want to learn more, and are willing to invest an immodest amount of time and money, this is a book you must read.Larry Harris is a brilliant contributor to the understanding of markets, and is currently Chief Economist of the Securities and Exchange Commission. This book however, is written as a textbook for the introductory markets class he taught at USC for many years.Larry's book pulls back the curtains on the mystery and mumbo-jumbo of what happens when investors buy and sell securities. The book is lightly written, with many anecdotes and amusing sidebars, yet presents the latest and best knowledge on how (and why) markets work.

Professor Larry Harris has compiled the most informative, enjoyable, and clear information that any book of this kind has. He is the best professor at the Marshall Business School. I took a class of his and learned and enjoyed the great study of market microstructures. I recommend this book to anybody with in interest in all the players involved in the game of trading.