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February 1, 2000

Cover Story - Trading Boot Camps: Can Colleges Simulate the Choas of Trading?

By Sanford Wexler

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  • Cover Story - Trading Boot Camps: Can Colleges Simulate the Choas of Trading?
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Some stock traders say the idea is as preposterous as learning to fly without ever cruising the sky. Can institutional stock trading be taught in the classroom?

"In an academic environment," responded William Black, co-manager of Fleet Trading in Jersey City, "the trading losses are imaginary. The impact is just not the same as in real life. The experience is not threatening or overwhelming."

The legendary Alan "Ace" Greenberg, chairman of Bear, Stearns & Co., once said the most important trait for a prospective trader is not a PhD but to have PSDS' - be poor, smart with a deep desire to become rich.

But across the U.S. a growing number of colleges and universities are now challenging these doubting pros. They are introducing high technology classes in simulated stock trading.

Shortage of Pros

As the bull market creates a shortage of qualified pros, and stock trading becomes more complex, academic institutions are outfitting classrooms with electronic trading floors that look like the real thing on Wall Street. The Ivory Tower of academia is making theory spring to life through fascinating computer programs and interactive games.

Business schools at Baruch College, Carnegie-Mellon University, the Illinois Institute of Technology, Bentley College, and the Massachusetts Institute of Technology have built state-of-the-art trading rooms that replicate the fast-paced world of top trading firms with computer workstations, sophisticated software and live data feeds. At the University of Texas students are even managing a genuine $14 million fund that is returning an average of about 22 percent a year. Meanwhile, Nasdaq aficionados anywhere in the world can tap into the Net and play an interactive Nasdaq game called Head Trader to find out how they fare at being a market maker.

Institutional stock trading pros, who first learned about trading directly in the trenches, do admit that there is merit in the simulated trading experience. "If the graduates [from these schools] make money, then they are great," said "Ace" Greenberg.

"The vernacular used by them might be different but there are some excellent business schools that could teach the basics of trading very well," added Black of Fleet Trading, taking a respite from a head-splitting day on Nasdaq.

Lon Gorman, president of the capital markets group at Mayer and Schweitzer, is even more positive. He is a strong proponent of the mock trading experience. "An excellent idea," said Gorman, a trader who worked his way up the desk. "Although [business school] graduates may have a sound background in economics and finance, the art and science of trading has not been necessarily taught."

While Gorman conceded that all novice traders must go through an apprenticeship, students who graduate from schools with simulated trading programs have to spend less time learning the ropes.

The Graduate School of Industrial Administration at Carnegie-Mellon University in Pittsburgh was the first school to offer a simulated trading program. The centerpiece of the school's Financial Analysis and Securities Trading (FAST) program, started in 1992, is a trading room that functions as both a classroom for budding traders as well as a laboratory for testing quantitative trading strategies.