Rogue traders in Toronto

07/07/2013

This is a guest post written by finance graduate Vilppu Tarvainen and RITC team members Pekka Kallionpää, Lari Palenius and Risto-Matti Roslander. For further insight on their experiences, check out the previously shared Talouselämä article and Maria’s previous blog post on the Rome competition.

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In this blog post I will share some of our experiences while trading at the Rotman International Trading Competition (RITC) in Toronto, Canada. The competition was bigger than the European version (RETC), and also featured some tough players all around the world. We got to trade against MIT, University of Chicago, and several North American Quantitative Finance MBA-program candidates. It goes without saying that the level of the competition was high. Some teams for instance had used the same crew for two to three consecutive years, and were obviously very comfortable using advanced tactics and techniques. I also took part in the RETC last autumn, which Maria commented on previously.

Our team was selected from the Advanced Investment Theory course, which we all attended in spring 2012. We all had relevant work experience from leading Nordic and global investment banks, so the mindset and skills were quite familiar to us. However, I would urge everyone interested in trading to apply for the team! It is often best to learn in practice, and trading is a prime example of this. Our experience helped us to keep our head cool in the market turmoil and also justified our sometimes brave and aggressive strategies. At the end of the day however, you are only as good as your P&L.

The competition was similar to the RETC, as it was formed of 6 different cases: Sales&Trader (equities), M&A (distressed equity), Quantitative outcry (old-fashioned floor-trading), Options, Commodities and Algorithmic trading (not included in RETC). All the cases were run on simulated markets with either half or the whole team trading for the common P&L. The atmosphere at the trading desk was hectic and international, as all the teams were constantly yelling guidance in their native tongues. Luckily for us, Finnish is close to impossible for the others to comprehend.

Apart from the tough competition and experienced fellow competitors, the main challenge of RITC was the lack of liquidity. The only liquidity providers were the traders present in the market. In other words, no other market-making mechanisms existed. This created interesting situations especially in the Sales&Trader part, where the clearing of a whole order book’s right-hand or left-hand side was not uncommon! These sorts of situations added to the atmosphere especially when the off-market orders were filled instantaneously and people made fortunes. The competition tested the nerves of the teams, as the price formation process in the market was quite opaque: new information was not always transferred to the prices, and the delay between the news and the price change was often illogical. We learned that the hardest part is to cut your losses, start from scratch and take active risk again. One can only lose a game in the first minutes, not win – being able to deliver constantly is the key to success.

If you would like to learn more about trading in the RITC setting, be sure to visit their homepage at http://ritc.rotman.utoronto.ca/.

Best of luck to all of you on your studies!

Vilppu

MSc graduate (June 2013) – Team Aalto member in RETC 2012 & RITC 2013

 

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