Traders for a Day - AU Faculty of Business

Traders for a Day

Traders for a Day
Testing the real market value of education

by Heather Bissonnette
photography Chicago Mercantile Exchange / Andrew Collings

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At age 12, Natalie Allport and her brother were already ahead of their lemonade-selling peers. Seeing a niche in the sports industry, the pair made and sold agility ladders to local sports teams.

“We would make them while we were watching TV after school or after we finished our homework,” Allport recalls. At a time when Nike sold the ladders for $100, the Allports sold theirs for $25. It only cost $12 to make the ladders. In the end, the entrepreneurial pair pocketed a few thousand dollars.

For Allport, it was an early lesson on how raw materials, marketing and real demand influence the value of goods. Since that early experience sports and entrepreneurship have remained consistent themes throughout Allport’s life. Currently, as an aspiring Olympian on Canada’s national snowboard development team, she is used to competing at the highest level. She never dreamed that she would one day be trading on the Chicago Mercantile Exchange (CME)—but after answering a call for participants from the Athabasca University Faculty of Business, she found herself suddenly immersed in the real-life process of electronic trading.

Each year, the CME Group (which operates the exchange) hosts an international competition for business students, allowing them to gain first-hand experience in financial markets. “There is no better way to learn about commodity trading than through real-life trading on the real market,” said Allport, who also owns stock of her own.

Founded in 1898 as the Chicago Egg and Butter Board, the Chicago Mercantile Exchange is one of the oldest and largest public trading venues in the U.S. When it began, the CME was a place for buyers who wanted to invest in real goods such as crude oil, wheat, corn, cattle and lumber—like the wood used in agility ladders. Through expansions and mergers, the CME Group now handles over three billion contracts each year, covering a wide range of asset classes including futures, options, equity and interest rates, as well as commodities. On average these contracts are worth over $1 quadrillion annually.

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Historically, these contracts would have been traded by open outcry—the classic method of trading seen in Hollywood movies, where traders wearing different-coloured jackets crowd into a pit, making trades by shouting out numbers and using a complex system of hand signals.

Over time, however, trading has evolved with technology. The CME shut down its futures pit on July 2, 2015. Futures will still be traded, but electronically.  It’s a whole new genre in trading where stocks are bought and sold using mathematical equations that are pre-programmed into computers.

The CME Globex is the first electronic trading system for futures and options. The Globex allows for trading to occur 23 hours a day. CME’s pioneering SPAN software is used by over 50 registered exchanges, service bureaus and regulatory agencies around the world.

In the 2015 CME Challenge, 503 teams from 226 universities participated in a market simulation, which ran over four weeks and involved the same trading methods used on Globex. Teams had to determine what commodity to trade, develop their strategy and define trading parameters using SPAN software.

For AU students used to online learning, working in a simulated electronic environment would prove to be an advantage in the competition. Unlike other teams that entered from traditional universities and met regularly throughout the competition, the first time Allport met her team face-to-face was when she arrived in Chicago. The team managed their communication via teleconferences, text messages, phone calls and emails.

“The other teams thought it was pretty cool that we made it all the way to the finals just by teleconferencing and emailing,” said Allport.  “Especially because they were getting together all the time, or they had been friends prior, and they were doing a lot of work on it all the time.”

“Our students are accustomed to working together on the basis of virtual communications,” explains Dr. Eric Wang, undergraduate programs director and academic advisor to Allport’s team. “That enables our student teams to function—share info, analyze data and situations, make trading decisions—effectively without meeting face to face.”

While Allport agrees, she also identifies another key contributing factor. “Our academic advisors were active in almost every teleconference and played a vital role in our team’s success.”

Allport’s team, Far and Wide Traders, consisted of herself and two other undergraduate business students, Alexander Poulton and Op Sihota.  Allport had never met either teammate prior to the competition. Team Far and Wide used teleconferencing and decided to trade crude oil based on Poulton’s previous knowledge and interest in the commodity.

In the outset of the competition, teams spent two to three sessions a week communicating with each other but by the end communication was daily. The trading platform only allowed one team member to log in at a time. Therefore, trading occurred individually in a scheduled timeslot.

At the end of the four weeks, each team’s portfolio was evaluated. At stake was an invitation to Chicago to participate in the CME Group Day of Market Education for the top 50 teams worldwide. When results were tallied, Far and Wide Traders had maneuvered themselves into 28th place. MBA students Todd Boyer, Anshula Ohri, Tim Stevens and Stephanie Partridge comprised the second AU team, the AU Traders, which finished 39th overall.

Prior to arriving in Chicago, AU Traders teammates Ohri and Partridge had never met, but they connected instantly. “She immediately embraced me and I felt that I was with one of the family,” says Ohri. “Being part of the online learning environment does that. I think it is part of the culture of Athabasca University, and has also made me more open to immediately offer support and friendship to fellow students.”

Meeting in person for the first time added to the excitement of the teams’ arrival in Chicago for the CME Day of Market Education, held April 10, 2015. Upon landing at O’Hare International, the students were whisked to Chicago’s downtown Financial District, for a conference breakfast, team photo shoot, a meeting with CME Group CEO Phupinder Gill, education sessions and tours of the CME facilities.

In a city renowned for its worldly architecture influenced by Frank Lloyd Wright and Ludwig Mies van der Rohe, one of the most impressive spectacles for Ohri was seeing the hallowed inside of the Globex trading platform. “There were giant screens all over the place, looming down from above, along the centre of the room and on corners,” she recalls.

At the conference breakfast both AU teams sat with the CME Challenge first place winners, OzU Invest from Ozyegin University in Turkey. “Seeing all the teams from different places in the world and then discussing trading on an international level was eye opening,” says Allport. She was particularly impressed with the level of financial and trading knowledge of all the other students.

Overall, the CME Challenge left Allport with an expanded sense of the world markets and her future career options. “It made me feel like there’s a lot more opportunities in the world,” she said. “And it gave me a good perspective of where business is going … and the global economy, things that I might not have been paying attention to locally.”

For the former sports equipment mogul, it’s just one more rung on the ladder to success.