“Business students roll up their sleeves and trade futures at Tulane's second annual Energy Trading Competition”

Business students roll up their sleeves and trade futures at Tulane's second annual Energy Trading Competition

Posted: 25 Oct 2010 04:24 PM PDT

Published: Monday, October 25, 2010, 6:02 PM Updated: Monday, October 25, 2010, 7:28 PM

Mike Jones, a graduate business student at Tulane University, could have been mistaken for a professional energy trader Saturday morning.

With his shirt sleeves rolled up, the 23-year-old from Charlotte, North Carolina, hunched in front of a dual-screen terminal as the university's second annual Energy Trading Competition got underway.

"My first job is to get exposure for my company. My second job is to manage risk," Jones told the judges of the competition, which was held in Tulane's trading center, a room set up to simulate a real-world trading floor.

Across a row of computers, Roger Rojas and Lorenzo Piccirilli, both seniors at Michigan State University, talked quietly about their own approaches to the competition.

"I'm going to be looking at buying natural gas at the best price I can get," said Rojas, 26, a Cuban-born resident of East Lansing, Michigan.

"I've got a strategy, but a news report could change that. There's no time to be nervous," said Piccirilli, a 21-year-old from Sterling Heights, Michigan. "I think it's going to be kind of unpredictable."

Piccirilli was right about the unpredictable part.

Business students from nine universities around North America spent Saturday competing to see who could produce the best results while using simulated portfolios to electronically trade oil and natural gas futures. Rutgers, the University of Texas, and the University of Toronto were among the schools that sent teams to the trading competition.

And there were plenty of surprises along the way.

News reports posted on a giant screen in the room alerted students that Hurricane Richard was eyeing the Gulf of Mexico, that the United Kingdom had approved a gas storage project, and that the Republicans had issued a statement on the drilling moratorium, all developments that could potentially impact energy markets. At the same time a judging panel of professional traders, including representatives from ConocoPhillips, Marathon Oil and Sempra Energy, circled the room questioning students about the decisions they were making.

"We still have our shirts. It was pretty traumatizing," Piccirilli said after the first of Saturday's two rounds of competition.

"You've got all these people who are smarter than you watching you," Jones said. "It was pretty cool. It got away from me a little bit, but I feel pretty good."

Berney Aucoin, vice president of Sequent Energy and a judge of Saturday's event, said the competition is good training for students because it forces them to respond to constantly changing market conditions.

"That's, to me, a good learning experience," Aucoin said. "Their best-laid plans may go against them five minutes into the session, and how they react is a good learning experience."

"It's as practical an experience as I've seen in an academic environment," said Aucoin.

John Conolly, associate director of Market Education for CME Group, the exchange that was created out of a merger between the Chicago Mercantile Exchange and the Chicago Board of Trade, agreed.

"The reason we are here is simply because this is the most realistic simulation," he said.

Half the students in each round of competition were assigned the role of being a buyer, or a consumer of energy. The other half were tapped to be sellers representing refineries and energy companies. By assigning the contestants these positions, the competition helps students learn not just how to trade, but how to represent a company and manage its risk. In fact, the competition judges students not merely by the amount of money they make, but their ability to produce strong returns while still managing risk conservatively, an approach that is expected of most professional energy traders.

"As we've all seen with the last couple of major market events, most firms are looking at risk in a different way," said Nick DiCosola, vice president of Thomson Reuters and a judge for Saturday's event. "A lot of those companies have realized that risk is real. They're looking for people who can maximize their profit while minimizing risk."

"It's not like (the competition) is training people to become daytraders from home. The world doesn't need more speculators," said John Bertuzzi, a judge who retired from Goldman Sachs' J. Aron commodity division.

Rather, the competition "trains people to help companies manage their commodities risk exposure," he said.

"This type of training allows students to contribute fairly immediately" once they've been hired, Bertuzzi said.

DiCosola said the competition's focus on oil and gas futures trading also helps prepare students for jobs in energy trading in particular.

"There certainly are jobs (in energy trading)," he said. "For a long period of time, there was a big focus on fixed-income and equity (trading). I think the energy markets are catching up."

Energy trading "has momentum and there's a lot of focus on it."

Trading is also increasingly being done electronically, rather than with the traditional open outcry method, where traders yell and make hand signals to transmit information about orders. The Tulane competition emphasizes electronic trading by having students execute trades using professional trading software provided by Trading Technologies, Inc. and Thomson Reuters. Winners of the competition were awarded cash and trading softwware. Rodrigo Polezel of Rutgers placed first. Michael Grubbs, a graduate business student at Tulane, placed fourth.

Leo Murphy, University Program Manager with Trading Technologies, said his company provides its trading platform to 26 schools, but that Tulane, which incorporates the platform into coursework, uses it the most heavily.

"This isn't something that a lot of people have access to," Matt Layfield, a 23-year-old Master of Finance student at Tulane, said of the software. Layfield thinks his experience working with professional trading software will be a specific skill he can point to as he hunts for a post-graduation job. He'll also be able to talk about the strategies and methods he followed during the competition on his job interviews.

Rojas, the Michigan State senior, also thinks his participation in the trading competition could pay dividends when begins looking for a job.

"It gives you great exposure. You can do a lot of great networking (at the competition)," Rojas said. "It's a great opportunity to meet people who can give you a start in the industry."

Kimberly Quillen can be reached at kquillen@timespicayune.com or 504.826.3416.

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