ICM315-Fundamentals of Financial Markets

Module Provider: ICMA Centre
Number of credits: 10 [5 ECTS credits]
Terms in which taught: Autumn term module
Non-modular pre-requisites:
Modules excluded:
Current from: 2021/2

Module Convenor: Dr Alfonso Dufour
Email: a.dufour@icmacentre.ac.uk

Type of module:

Summary module description:

To provide an economic framework for the understanding of global financial markets,

organised exchanges, market players and the importance of liquidity and price efficiency.


Participants will gain an understanding of the international stock and bond markets, ‘repo’

markets (for borrowing/ lending on a secured basis); an introduction to foreign exchange

and money markets, and to futures markets; finally, specific markets for commodity and

energy are presented.

Assessable learning outcomes:

By the end of the module, it is expected that students will be able to:

  • Describe the main features of global financial markets in bonds, stocks, foreign exchange, commodities and energy.

  • Explain he structure of financial trading systems and the characteristics of major players in each market.

  • Distinguish between exchange and OTC markets and between primary and secondary markets in each asset or instrument

  • Explain the role of intermediaries, mark-to-market procedures, quotation conventions and market mechanics

  • Critically evaluate the importance of liquidity and repo contracts

Additional outcomes:

Outline content:

1.General introduction to world financial markets: geographically, by type of exchange, by issuers, liquidity and type of instruments.

a) Liquidity, the distinction between exchange versus OTC markets and the role of intermediaries in their various forms.

b) Primary and secondary markets. Market mechanics including types of orders, market participants, margin and short trades.

c) Market players and effect on liquidity and price effic iency.

2.Order book trading: Limit order versus market orders. Order matching and priority rules. Price setting rules.

3.Market microstructure theory: dealers - Glosten and Milgrom model. Market making, inventory management, asymmetric information and adverse selection.

4.Fixed income and foreign exchange markets

a ) Short term debt securities issued by government and corporations. Classification of bonds according t o issuer: government, agencies, corporate and municipal. Comparison of bond markets in major countries and a description of the main intermediaries and their role.

b) Foreign exchange market - quotation conventions, types of brokers, central banks' policies.

5.Futures, option and commodity markets:

a) A comparison of the main exchange traded markets, options on futures, specifications of the most popular contracts, trade orders for futures contracts, mark-to-market procedure, and various expiration conventions.

b) Commodity and energy markets: Specific features, delivery and settlement methods, backwardation and contango, short squeezes and regulations. Price risks of oil, gas and electricity.

Global context:

The module explores global trends. International examples are used to illustrate key aspects of financial markets and regulation. 

Brief description of teaching and learning methods:

Each topic is presented in a lecture. Two practical workshops are used to discuss and

experiment with some of the concepts introduced in the lectures.

Contact hours:
  Autumn Spring Summer
Lectures 10
Seminars 5
Guided independent study:      
    Wider reading (independent) 30
    Wider reading (directed) 10
    Exam revision/preparation 24
    Preparation for seminars 5
    Revision and preparation 16
Total hours by term 100 0 0
Total hours for module 100

Summative Assessment Methods:
Method Percentage
Written exam 70
Class test administered by School 30

Summative assessment- Examinations:

1.5 hours, closed-book written examination (70%) 

Summative assessment- Coursework and in-class tests:

1-hour, multiple choice test (30%) (due in week 11 of the Autumn term).

Formative assessment methods:

Seminar questions are assigned for each class. The seminar leader will facilitate discussion and offer feedback. 

Penalties for late submission:

The below information applies to students on taught programmes except those on Postgraduate Flexible programmes. Penalties for late submission, and the associated procedures, which apply to Postgraduate Flexible programmes are specified in the policy “Penalties for late submission for Postgraduate Flexible programmes”, which can be found here: http://www.reading.ac.uk/web/files/qualitysupport/penaltiesforlatesubmissionPGflexible.pdf
The Support Centres will apply the following penalties for work submitted late:

  • where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days;
  • where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.
The University policy statement on penalties for late submission can be found at: http://www.reading.ac.uk/web/FILES/qualitysupport/penaltiesforlatesubmission.pdf
You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Assessment requirements for a pass:

50% weighted average mark 

Reassessment arrangements:

Reassessment arrangements: By written examination only.  1.5 hour written examination. 

Additional Costs (specified where applicable):

Last updated: 8 April 2021


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