1. List all of the participants in the Wall Street Code documentary that seemed to have a negative opinion of high frequency trading.

2. Stock trading in the US has come to be dominated by high frequency traders. At the same time, technology and regulation have tended to fragment the US equity market through development of alternative trading systems (i.e., there are now many markets on which to trade). Discuss the trading problems for the institutional investors in this environment and strategies they can use to minimize trading costs while executing their orders.

3. What types of costs must a dealer recover from the bid/ask spread?

4. Suppose a dealer has just used her own capital to fill a string of consecutive sell orders from customers (meaning the dealer is buying) thus pushing her far away from her desired inventory position. Outline all of the possible steps she can take to return to her target inventory level (near zero).

5. Why do dealers seek to set spreads with their estimate of the intrinsic value between the bid and ask prices? Under what conditions might they make the bid price further from their estimate of intrinsic value than the ask price?

6. Of the four auction types we studied, explain which are strategically equivalent in a private values auction and explain why they are strategically equivalent.

7. How did dealers on Nasdaq collude to keep bid-ask spreads high in the early 1990's?

8. What were some of the suspected causes of the 2010 Flash Crash and the resulting new regulation?

9. Consider the evidence presented and arguments discussed in class with respect to the impact of the transformation of equity markets into primarily electronic venues dominated by algorithmic trading. Are current markets providing worse execution quality than in the past? Are these markets unfair to the extent that regulators should create new rules to correct the inequality? Be sure to provide support for your arguments.