08.07.2019

Hands on Microstructure: A field trip to the Stuttgart stock exchange in the context of the course Financial Market Microstructure of PD Dr. Thomas Dimpfl

On July 4, 2019, participants of this summer's Financial Market Microstructure class went for an excursion to the Stuttgart stock exchange...

On July 4, 2019, participants of this summer's Financial Market Microstructure class went for an excursion to the Stuttgart stock exchange. Thanks to Stuttgart Financial and in particular Zahra Abdel Rassoul, the students spent an exciting afternoon trying to beat the market in a trading simulation and got some insights into the operations of the Stuttgart stock exchange. The trading simulation was conducted with LiveX, a simulation software developed by Goethe University Frankfurt. The students had three simulations runs. Each run covered one trading day and the goal was, of course, to make the most of the money which was initially allocated. This way the issues in trading like liquidity, slippage, information processing, covered theoretically in class, transformed into real issues when trying to beat the market maker, simulated traders, and their fellow students. While the evolution of the trade price was based on real companies like Tesla and the Deutsche Bank and therefore seemingly known, it turned out that profit making is not as easy, even if no order handling fees are charged.

After the simulation game, Ms Abdel Rassoul brought the group onto the gallery overlooking the trading floor. Like any other exchange, it's computer dominated and there are decisively more screens than traders (by a factor 6 approximately). The group learned that Stuttgart is for many asset classes the exchange with the lowest spread, but has high transaction costs. This combination should give food for thought for the students and will be taken back to class for further theoretical discussion.

Overall, it was a great experience. The students and PD Dr. Dimpfl were grateful to Stuttgart Financial for making this trip possible!

Text: Thomas Dimpfl

Bild: Universität Tübingen