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Assignment/Coursework Remit
Programme Title MSc Investment
Module Title Market Microstructure and trading techniques
Module Code 07 36912
Assignment Title Role of Dark Pools in Facilitating High Frequency Traders
Manipulation
Level Master
Weighting 50%
Lecturers Dr. Jiaqi Guo
Hand Out Date 30/01/2024
Deadline Date & Time 10/04/2024 12pm
Feedback Post Date 17/04/2024
Assignment Format Report
Assignment Length 2000 words
Submission Format Online Individual
Assignment:
Detail of the tasks that students are expected to complete as part of the assignment remit.
Comprehensively define a dark pool and assess its influence on market transparency and
stability.
Comprehensively define a high frequency trader and the role they play in a stock market. The
answer should define High Frequency Trading and give some examples and to put in context
where they are active and how this has grown. This allows the report reader to understand
their contribution to markets more clearly.
Discuss how a dark pool works and the benefits it can bring to traders in the form of liquidity,
reduced costs and increased efficiency.
Critically identify how dark pools favour some traders such as high frequency traders and the
benefits and adverse effects this can have on other traders.
Identify how Dark Pools can benefit some traders.
Evaluate the impact that Dark Pools can have in terms of aiding high frequency traders to
manipulate markets and the extent to which this is important.
The evaluation should examine recent evidence that demonstrates that the presence of HFT
activity may have increased liquidity via metrics such as reduced spreads, increased activity
etc. Well-developed answers will evaluate whether it is possible to examine their liquidity
contribution purely in these terms as average activity and spreads may not be representative
of periods when HFT activity is completely withdrawn.
The role of HFT and Dark Pools in price discovery should be analysed and evaluated.
The role of HFT in contributing to excess volatility and their role in a flash crash should be
evaluated and the extent to which Dark Pools contribute to these pressures.
Students will come to their own conclusions about whether Dark Pools exacerbate and favour
HFT.
Module Learning Outcomes:
In this assessment the following learning outcomes will be covered:
(i) recognise and apply concepts widely used in market microstructure.
(ii) critically appraise different trading systems and the empirical evidence that examines the
provision of market quality and be able to evaluate important trading platforms such
as Xetra, SETS, NASDAQ and NYSE.
(iii) be able to interpret, synthesise and discuss arguments and evidence relating to market
microstructure.
(iv) be able to appraise knowledge of key developments in market microstructure and
understand their effects
Grading Criteria:
Knowledge and
Understanding
Intellectual skills Use of literature Research skills
70+ Comprehensively
addressed the topic
or questions as
indicated as the
objectives of the
assignment (and in
accordance with the
directions in the
assessment). Was
factually accurate.
Possessed a clear argument
that used a high degree of
critical analysis.
Covered the key issues as
expected and was able to draw
upon a wide range of sources.
Excellent use of empirical,
statistical or mathematical
support (where appropriate)
60-69 The topic or
questions were
addressed well in
accordance with the
objectives of the
assignment and
with the directions
in the assessment.
Has a clear, consistent,
logically developed
argument that leads
convincingly to the
conclusions. Good use of
critical arguments.
Many pertinent issues are
identified and included in a
balanced analysis appropriately
related to the topic or questions.
Relevant empirical, statistical and
mathematical evidence and
argument is used and explained
relative to the narrative in a
manner appropriate for the
discipline.
50-59 The topic or
questions were
addressed according
to the directions in
the assessment
sometimes but not
consistently. Some
errors of fact exist.
Has a logical argument that
is less consistently or clearly
developed but leads to the
conclusions. Less competent
in using critical analysis.
Important issues are identified
and included in a balanced
analysis that was mainly related
to the topic or questions.
Some empirical, statistical and
mathematical evidence and
argument is used and in most
cases it is explained relative to
the narrative in a manner
appropriate for the discipline.
40-49 The topic or
questions were not
consistently the
focus of the essay
&/or the direction
to
describe/evaluate/
critically assess/
The logical development is
somewhat flawed and
conclusions are only partly
supported. Discussions are
largely descriptive.
Important issues were not
included or given sufficient
weight or appropriately related
to the topic or questions.
Statistical and mathematical
evidence and argument are used
but it is not very relevant, and/or
not explained relative to the
narrative in a manner
appropriate for the discipline.
compare, etc. was
not achieved
convincingly. Some
areas of fact in
important areas of
the assignment.
-40 The topic or
questions were
largely not the focus
of the essay or the
direction in the
assessment was not
achieved.
Consistent errors.
The logical development is
seriously flawed and the
conclusions are not
supported by the argument.
Most of the pertinent issues
were not covered.
Weak use of empirical and
statistical evidence
Feedback to Students:
Both Summative and Formative feedback is given to encourage students to reflect on their
learning that feed forward into following assessment tasks. The preparation for all
assessment tasks will be supported by formative feedback within the tutorials/seminars.
Written feedback is provided as appropriate. Please be aware to use the browser and not
the Canvas App as you may not be able to view all comments.
Plagiarism:
It is your responsibility to ensure that you understand correct referencing practices. You are
expected to use appropriate references and keep carefully detailed notes of all your
information sources, including any material downloaded from the Internet. It is your
responsibility to ensure that you are not vulnerable to any alleged breaches of the
assessment regulations. More information is available at
https://intranet.birmingham.ac.uk/as/registry/policy/conduct/plagiarism/index.aspx.
Use of Generative AI:
Unless explicitly stated otherwise, students should assume that the use of generative AI
within an assessment or assignment is not permitted. Any assessment submitted that is not
a student’s own work, including that written by generative AI tools, are in breach of the
University’s Code of Practice on Academic Integrity
(https://intranet.birmingham.ac.uk/as/registry/policy/conduct/plagiarism/index.aspx
Wellbeing Extenuating Circumstances:
The process for Extenuating Circumstances is to support students who have experienced
unforeseen issues that have impacted their ability to engage with their studies and/or
complete assessments. Students should notify Wellbeing of any extenuating circumstances
as soon as possible via the online form, following the guidance provided.
https://intranet.birmingham.ac.uk/social-sciences/college-services/wellbeing/index.aspx