Trading and Exchanges by Larry Harris Recommended by TurtleTrader

“For several years, you have posted my paper, “Winners and Losers of the Zero-Sum Game,” on your website at I am amazed by the number of your clients who contact me to inquire further about the topics it addressed…I incorporated this paper into a recently published book. Trading and Exchanges: Market Microstructure for Practitioners is a plain language introduction to all aspects of trading.”
Lawrence Harris
Fred V. Keenan Chair in Finance
Marshall School of Business; University of Southern California

TurtleTrader Review

Professor Larry Harris’s “Trading and Exchanges” is as comprehensive a book about the markets and trading as you are going to find. The writing reveals the pragmatism and logic of someone who has honed his intellect with years of real world experience as a consultant to traders, banks, exchanges and regulators, but who has also performed in the trenches as a teacher in classrooms of students who do not suffer fools gladly.

At over 600 pages, this book is a long read, but it is organized so that you can flip to any topic and be certain of in depth coverage and accessible explanations supported by graphs and tables. Harris touches on just about every aspect of market economics, structure and regulation, from the players (speculators, arbitrageurs, bluffers, you name them), to the game (zero sum, liquidity, volatility, performance evaluation, portfolio management and more). This book is an objective, and more important, practical survey of an area of financial economics that has become increasingly, and needlessly, complex.

Each chapter begins with a content overview and ends with a summary, points to remember and questions for thought, a structure that will appeal to those readers who are studious by nature. In fact, the book works extremely well as the text for the introductory markets class that Harris taught for years at the Marshall School of Business at the University of Southern California. However, Harris sustains his straightforward, efficient approach with just enough of a “light touch” so you don’t get too bogged down in technical jargon.

For example, in “Trading Stories”, an early chapter comprised of routine trade case histories covering stocks, bonds, futures contracts, and currencies, Harris warns you to gloss over “the institutional details” and just “get a feel for what trading is all about”. This sound advice about how to process the book’s content is one reason why readers describe Trading and Exchanges as “accessible,” and it runs throughout the book.

By limiting his examination of economic issues in trading to an understanding of liquidity, transaction costs, informative prices, volatility and trading profits based on facts and hard data, Harris keeps us on the straight and narrow. We are unable to drift into that disingenuous and murky world of trading advice based on personal success, or failure in the markets. There is almost no mention of individuals by name. However, case history examples abound such as Harris’ “on point” use of Nick Leeson and Barings Bank to exemplify a rogue trader in his detailed breakdown of types of traders.

Harris does not focus on the topic of trend following per se, although he does spend time on zero sum and changing markets, two concepts underlying the trend following method. His 1993 paper, “The Winners and Losers of the zero-Sum Game: The Origins of Trading Profits, Price Efficiency and Market Liquidity” has long been posted on TurtleTrader as required reading. In Trading and Exchanges Harris fleshes out his earlier study by devoting even more thought to some crucial tenets of zero-sum.

Whether you are a novice or veteran investor, trader, dealer or broker, Trading and Exchanges cracks the code on practically every facet of market microstructures. It is a trading bible.

Larry Harris’ Trading and Exchanges at

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