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With more than 12 trading stations featuring dual monitors, a display board with running stock quotes, a continuous data feed from Reuters and two television monitors, the university's trading room is at the cutting edge of campus technology. "The purpose is to give students access to a high-tech trading environment," explains Patty Wosepka, a special projects manager at the university who was involved in putting the project together. "Because Seattle has the second largest number of Nasdaq companies in the area, a lot of [local] students are likely to go into the trading field," she adds.
Washington isn't the only school looking to expose students to a real-life trading environment. Just a few years ago, there were about a dozen universities across the U.S. that boasted mock trading rooms. Today, estimates place the number at more than two dozen, though no one officially tracks the figure.Among the institutions that have simulated trading rooms are the University of Washington, Penn State, Texas A&M, MIT, Carnegie-Mellon, Vanderbilt, Bentley College, the Illinois Institute of Technology, Michigan State, Tulane, Baruch College and Saint Joseph's University.
The move to create campus trading rooms is driven by donations from alumni - many of whom have had success on Wall Street themselves. Additionally, the technology costs of setting up a trading room have dropped, making it an affordable fundraising initiative.
By introducing trading technology to their classrooms, universities are providing students with a more practical education and tools that can immediately be used in the workplace. It gives those schools with trading rooms a leg up on their competitors when it comes to Wall Street recruiters.
"We try to give our students that competitive edge and not only understand the theory of economics and finance, but know the tools and practical application of them," relates Richard Holowczak, director of the Subotnick Financial Services Center, which hosts the Bert and Sandra Wasserman Trading Floor at Baruch College CUNY in New York City.
The main attraction is the trading floor itself," says Holowczak. "We have 42 high-end Dell Precision Workstations," which run the Windows XP Professional operating system. "Reuters brings us a real-time data feed." The system uses Reuters 3000 Xtra service and Kobra.
"The system lets students trade against the market, he says. "It includes real-time information from about a half-dozen stock exchanges. The university has obtained fee waivers from the various exchanges, a typical arrangement for similar simulated trading rooms.
Holowczak stresses that the trading room is educational only. "No real trading goes on and no data leaves our center," which is located in the heart of New York City. "Every financial-service firm hires from Baruch," he adds.
The trading room, which opened in March 2000, can be used by any of the 15,000 graduate or undergraduate students at Baruch. "One of the things we offer are free workshops to any of our students to help them with the mechanics of getting into Reuters and working with [its] instruments."
Vance Roley, associate dean for academic and faculty affairs at the University of Washington, says his school's trading room provides students with a practical understanding of the markets. Students in the MBA program who are studying finance use it, and he hopes to extend it to courses that cover subjects like options, futures and risk management.
Although the trading room has only been in use for one semester, Roley says the students learned a lot. "The thing they learned the most was how risky the market is. It helps them appreciate the risk metrics."
Not Only for Traders
Technology executives at Wall Street firms will be happy to know that some of the programs aren't simply focused on breeding traders. Schools are also using the systems to help develop software programmers and IT analysts.
Joseph DiAngelo, dean of the Erivan K. Haub School of Business at Saint Joseph's University in Philadelphia, notes that in addition to teaching portfolio analysis and financial analysis courses, "We also use the trading room in information system courses, because we want our computer information students to understand software and how to manage software in the trading room. It provides opportunities for students in technical areas to find positions with a trading firm."
The Saint Joseph's trading room features a ticker board and 36 IBM Net Vista computers with 17-inch flat-screen dual monitors. The system includes Reuters StockVal research software and software form Ibbotson that is used to analyze a portfolio's efficiency and risk. Students can download information to Excel spreadsheets for analysis. "If you walk into our room, it has the same look, feel and smell as an actual trading room," says DiAngelo.
Like Saint Joseph's courses, Baruch's program is also geared to train students to program software for the financial-services industry, and not just trading, notes Holowczak. "We're one of the few [trading rooms] run from the computer information systems department. Most of the others are run out of the finance department," he says.
Learning Limits
Mock trading rooms do have their limitations, however. The market impact of students' trades aren't taken into consideration, and there's also a lack of exposure to trade order-management systems and back-office functions. For now, Holowczak says, students don't see how their trades impact liquidity and price. So his school is looking at technology that will allow the students to trade against each other, he says. But, he adds, "We actually show students how you develop software databases to handle order-management systems, trade matching and reporting."
The cost and complexity of establishing a trading room are often prohibitive, as well. Set-up costs can run as high as $500,000, and it takes another $100,000 a year to run one. And starting a trading room can be overwhelming, Saint Joseph's DiAngelo says. Accordingly, most schools introduce the trading room in stages, starting with basic finance courses and then introducing more advanced courses, such as computational analysis.
Finally, keeping abreast with technology changes is also a challenge - as is finding the financing to keep up to date. Baruch's Holowczak is quick to note, however, that a few years ago, a trading room would have been out of the question on a college campus. "The bandwidth wasn't there, the reliability wasn't there," he says. But thanks to the Internet, that's changed, he continues, and now the technology is "pretty robust."
Most schools are eyeing continuing-education opportunities and hope to turn their trading rooms into places where current Wall Street executives can come back for upgraded training. The University of Washington's Roley notes that the business school has added executive training courses in other areas and the trading room presents opportunities to get into that game. "It's something we want to do in the future."
