Finance Society hosts first-of-a-kind trading game

On the 29th of November, teams from several universities from all over the UK competed in a never before seen trading simulation. The trading game held at Imperial was part of the national UK Investment Banking Series, a competition initiated in 2010 by the Imperial College Finance Society (ICFS) which has proven to be a great success.

The trading game itself is one of a kind – the concept and technology are the brainchild of two Imperial students, Bradley Jones and Philip Heurich, both mathematicians in their final and second years respectively. Consequently, they have founded the trading simulations and software company Dynamic Simulations, which aims to take the product they have created specifically for the game and bring it to market. “Having taken part in numerous trading simulations and comparing those with the experience of working on a real trading floor – the contrasts between the two is unavoidable. It was at this point we knew there was a gap in the market”, says Bradley Jones. The two main differences between the simulation that featured in the UIBS competition and its competitors are significant. Firstly, the market behind each security is dynamic. That is to say that the prices of the traded instruments can be influenced by the players’ actions. In this way, the players really can ‘move the market’. This is based on an algorithm that takes into account the underlying trend, the volume currently in the market and the absolute size of the trade. A player placing a large order will undoubtedly move the price of the traded security higher.

The game splits teams into hedge funds and investment banks and focuses more specifically on the existing relationship between the two. Hedge funds need investment banks to perform operations in the financial markets and investment banks earn commission by enabling these positions. This element of interaction between the teams creates an environment which requires the use of all forms of communication: shouting across a room, calling on the phone or chatting via the internet – the overall result being the buzzing atmosphere of a hectic trading floor!

“The focus lies very clearly on simulating what is called flow trading as opposed to prop trading. The former is what most graduates starting at a major investment bank will be doing in their first years. But interestingly enough, the simulations currently out there focus mostly on prop trading” said the other half of the Dynamic Simulations team, Philip Heurich. What is the real difference between the two types of trading? Simplified, prop trading means that you are given a lump sum of money and buy or sell assets with it; flow trading is when an entity, such as an Investment Bank, is creating a market by joining buyers and sellers and enabling them to trade the quantities they are looking for. Naturally, it would be of interest to potential future traders in the investment banking industry to get in contact with the particular challenges that flow trading poses. The game hosted by the finance society serves this exact purposed and provides students up and down the country the chance to get as close to the real thing as possible.

After 6 hours and 35 minutes of intense work on trade deals and analyzing markets, the participants were happy to have experienced the excitement of the floor and have learned what flow trading is all about. The overall winner of the UIBS challenge was a hedge fund team from UCL, winning a grand prize of £1,000. Our very own Imperial investment bank team followed to take the runner-up spot and secure a £500 prize. To win the challenge it takes more than just the ability to read the markets: communication and networking skills are vital. The winning teams displayed all the necessary skills making this type of event a great opportunity for the recruiting firms to spot talent. The event as a whole went incredibly smoothly and has helped Imperial’s Finance Society cement itself as an innovative, experienced and market-leading player on a national scale. Smeet Shah, studying Accounting and Finance at the University of Manchester said, “My dad is a stock broker and this competition gave me a feel of his work life. I have played similar trading competitions before but this was the best of all.”

It is great to see Imperial clubs and societies actively engaging in collaboration and competition with other leading UK universities. It is a competition that the Finance Society certainly hopes to see running again next year. Imperial, remember the age old adage of “buy low, sell high”.