Students Bid Their Way to Victory in Trading Contest
Apr. 15, 2010
UT Dallas undergrads recently shouted and signaled their way to the pinnacle of an “open outcry” contest, taking first place and three more top 10 spots in a mock trading challenge that tested their skills in buying and selling commodities.
Brokering hypothetical oil contracts, the UT Dallas Financial Leadership Association (FLA) team competed against students from other universities at the annual simulated trading-pit event, the Chicago Mercantile Exchange Group Open Outcry Competition. The University of Houston, which along with the New York Mercantile Exchange created the contest 10 years ago, hosted the March 27 competition.
Derek Connell, a School of Management senior and FLA events coordinator, took first place and earned $1,000.
Other FLA competitors who earned $100 each for their performances were:
- Crystal Hu, FLA’s coordinator for the competition this year and a School of Management junior finance and economics major, who finished in fifth place.
- Joshua Bates, a School of Economic, Political and Policy Sciences senior, who placed seventh.
- Allen Wai-Ming Tam, a School of Management junior finance and accounting major and FLA’s membership director, who took ninth place.
In all, FLA, which is based in the School of Management, took 21 undergraduate and graduate competitors to Houston. After three preliminary rounds of brokering, the outcry’s field of about 60 contestants had narrowed to 12 finalists, Connell said.
Though the frenzied floor exchanges of hollering and sign language may strike onlookers as uncontrolled chaos, they are guided by formalized rules that the contestant brokers tried to follow.
For instance, Connell explained, “When you’re buying you have your arms up and your palms facing toward you. If you’re selling, you put your arms up and your palms outward.”
“Discipline is paramount,” Bates said. “Using wrong terminology, hand signals or offering at an incorrect price are all good ways to be eliminated.”
Judges, working both in the midst and on the fringes of the traders during the six- to nine-minute elimination sessions, watch each contestant to see “first of all, that he does everything properly,” Connell said, “and second, that he doesn’t make mistakes.”
David Cordell, a School of Management professor who accompanied the FLA team to Houston said, “It was especially interesting to watch some normally quiet students become maniacs in the pit.”
“The competition was fabulous learning experience for the students,” Cordell, director of SOM’s Master of Science in Finance program, added. “One thing they learned is that trading in the pits is stressful and exhausting.”
Cordell described the competition as “a great opportunity for students to have a hands-on experience in seeing how assets can be priced in the real world.”
FLA President Jeff Harrington, a School of Management MBA student, described the outcry as “an eye-opening experience as to how the market operates as smoothly as possible in order to match buyer and seller with best execution.”
The Houston competition and a subsequent outcry contest to be held in New York on the NYMEX trading floor constitute the second phase of the annual CME Group Commodity Trading Challenge. Joshua Bates will be representing UT Dallas at the NYMEX outcry on April 16.
The first segment of the CME Group Challenge, a four-week electronic trading simulation, focuses on crude oil and gold futures in an online desktop contest run on a real-time platform.
Last month, School of Management MBA student Adib Motiwala led the FLA’s graduate team to a sixth-place finish among the 111 teams that competed in the preliminary desktop round. The 2008 UT Dallas team won the desktop competition.
“What I want to especially highlight is that this team came in first, sixth and sixth the past three years,” FLA adviser and School of Management finance faculty member Frank W. Anderson said. “A remarkable track record for any school.”