When the CME Group Trading Challenge wrapped up in March, four schools from three continents claimed the top prizes, including the first ever non-U.S. champion. It was a bit of a departure from the competition’s previous results, which saw primarily U.S. schools earning the top spots. And most of those were from many of the country’s top business programs and from schools that routinely attract elite students – places like the University of Chicago, Princeton and Rice, which has twice won the competition. As the field of teams has grown in recent years – this year, 385 teams participated — the traditionally strong performers have remained, and finished well. But there’s been room for more than a few upstarts.Maybe none of those was more unlikely than The University of Texas Pan-American.
Five teams from the school entered the competition for the first time this year. For students so new to financial markets, participation might have been its own reward – the chance to test their skills and hopefully finish in the black. But on February 21 when the championship round participants were revealed – the top 10 percent of all teams competing – three of them were from UTPA, making them one of only two schools to send that many teams to the finals.
UTPA is a mostly minority-oriented school located just across the border from Mexico in Edinburg, Texas. Many of its 20,000 students are bilingual, with some speaking English as a second language growing up in the nearby Rio Grande Valley. The emergence of the school as a top flight performer in CME Group’s Trading Challenge started with the arrival of Bruno Arthur, a lecturer at the school’s Department of Economics and Finance. Arthur twice participated in the Trading Challenge as a PhD student at the University of Kentucky. In 2013, his team finished sixth overall. When he came to UTPA, he introduced his students to trading and to the Trading Challenge. “In many ways I brought this experience with me,” he says of getting his students involved. As they prepared to enter other trading competitions, we caught up with Arthur to talk to him about the experience for the UTPA teams. This is an edited version of our conversation.
Bruno Arthur, top row third from right, poses with members of the UTPA teams that participated in the Trading Challenge.
UTPA had never been in the Trading Challenge before. How did you get so many students interested?
Last semester in the fall we started to play a stock market game. The Trading Challenge came from my past experience because I was involved in it in 2012 and 2013, while a PhD student at the University of Kentucky. So when I came here to the University of Texas Pan American, I had the experience of playing in the challenge. I was looking for ways to share my practical experience with our students. They are very hungry to augment their knowledge of financial markets.
How did the competition this year compare to your past experiences in it as a student?
I like it better because we have choices between oil and natural gas, corn and soybeans, and in financial products like interest rates and foreign exchange. It gives us an array of choices now. I think it gives our students an opportunity to learn to hedge some more. Crude oil and natural gas are both energy, but of course there are differences in the markets. If you want to make money, you have to know which has more volatility. That was one of the handicaps when I played.
For our students here, they say they learned a lot. I think one part of it is comes from the opportunity afforded by CME Group with a large array of choices between commodities and financial products. I think that was a good experience, and it gives them a larger opportunity to learn.
You were the faculty advisor to the three UTPA teams that finished in the top 10 percent of all competitors. What was your role as a faculty advisor?
We would meet every Wednesday, and whoever is present, we would discuss what they’ve done and some people describe their strategy. After that, we open it up for questions and answers among the group. I’m not the only one answering questions. Our weekly session lasts about 45 minutes and that’s it. In the meantime, some students came to my office for ad hoc questions. While each team has the responsibility of deciding what they want to do with their account, we discuss as a group every week.
The University of Texas Pan-American was one of only two schools to send three teams to the championship round. How were your teams so successful? Did they use similar strategies?
Different strategies. We had five teams. So in the initial rounds, the teams were kind of treading water. One team is made of graduate students. The members of this team decided to divide the day and night hours among players on the team. So they created a schedule and took turns watching the market and collecting news.
One of the undergraduate teams traded only during the day but the team had a laptop dedicated to CQG 24-hours a day The team members monitored the market from that laptop and discussed their trades on the fly. They mostly traded metals.
After three of our teams went to the final round, we were sharing our experience at one of our Wednesday meetings., As a result, all the teams decided to have a computer dedicated to watching the market. But still, they did not use the same strategies. They all watched the market more closely though, because you can be very informed by just watching the CQG interface and following news.
Edinburg, Texas is the home of the University of Texas Pan-American
You’ve said this was a life-changing experience for the students involved. What do you mean by that?
One of our students, Cristhian Melladocid, is an international finance PhD student from Chile. He had his first opportunity to get hands-on experience with commodity futures. After he graduates, he will go back to his university in Chile and he plans to take his CME Group Challenge experience and share it with his future students.
Another one of our PhD students, Sergio Garcia, had experience with other trading software. The CQG software gives him an appreciation of financial markets’ complexity and diversity
An undergraduate student, Erik Munoz, is majoring in computer information systems, rather than financial economics. His exposure to financial markets through the financial derivatives competition increased his financial literacy, and he’s now thinking about studying more finance courses in addition to his computer information systems courses. So you can see that his mind has been opened to financial markets
How was The University of Texas Pan-American so successful overall in the Trading Challenge?
There is something common with our students. I would say they are dedicated. I would even say insecure. They have this personality because many of them are the first in their families to go to college or graduate school. They have a sense of dedication. This forms a kind of closeness, which allows students to dedicate time and heart and minds to what they are doing.
For instance, during the tournament our students had laptops loaded with CQG software, so you will see them with the CQG software in class, in study areas, everywhere. Sometimes I am amazed. They sometimes wonder if they are good enough. They ask, ‘Am I doing well?’ I think that’s a cultural trait that drives them to do their best.
Also, these students display a lot of discipline in carrying the experience around with them. We talked a lot about CME Group for the last two weeks. It’s like CME Group became part of our life. They would ask each other, ‘How did you do last night?’ So there was a lot of excitement around the competition.
What about the format in which they’re competing against other schools? Do you think that drove your students as well, or was it just something they enjoyed doing?
Absolutely. In fact, one big objective of our teams was to be invited to come to Chicago (for the Day of Market Education in April). We’re located 1,600 miles from Chicago, so we were playing not just to be in the top 10 percent. We wanted to finish high enough to be “in the money” and to be able to afford a trip to Chicago.
UTPA is a minority-oriented school. What does economic and ethnic diversity bring to a global competition like this?
We are located across the border from Mexico. Our student body is very much aware of forex, international exchange rates. And so our students are aware of international economics being located in Texas, where we have oil, live cattle, corn, and soybeans; as this is also an agricultural region. Our students have a background that is aware of international trade, aware of agriculture, aware of foreign exchange, which are economics sectors related to the CME Group competition contracts
Most of our students here are of Hispanic heritage. How many times have we had the opportunity to compete with the University of Chicago, and other highly ranked schools like Boston University and Duke? But we have that opportunity through the Trading Challenge financial derivatives competition. It gives us an opportunity, as a minority-oriented institution, to compete with the big names. And to get three teams in the top 10 percent is big news for us. We are excited, we wish to be invited and we look forward to playing again next year.