CME bracketology

April 29, 2016 01:00 PM

While many of us have been wrapped up in the diminishing returns of our NCAA tournament brackets, another spirited competition among college students had been taking place. The 2016 CME Group Trading Challenge has pitted colleges from not only your favorite power conferences and regions, but globally. The Challenge helps educate college students about trading and allows them to show off their financial skills. This competition has proved not only popular nationwide but internationally, with the top prize going to Nanyang Polytechnic of Singapore. Did you have them in your final four?

How it works

The competition is designed for teams, not just individuals. Each team is able to trade 10 products in a variety of asset classes. The competition is conducted entirely online, where students trade daily on a simulator using live data. Teams must execute a minimum of 10 trades per day for the duration of the competition. If teams do not reach their trade minimums each day, their cash balances are penalized. The competition consists of two rounds lasting a total of four weeks. The top 10% of teams advance to the final round. At the end of it all, the four teams (trading’s Final Four) with the highest account balances are named as the winners. All four teams are awarded a cash prize. 

Competitors

Teams are made up of 3 to 5 students. Each team competes on behalf of their university. There were 468 total teams registered for the 2016 competition. Just fewer than 2,000 students competed in the challenge. There were 200 different Universities from 30 countries represented in the competition. The majority of the students were pursuing undergraduate degrees (66%), while 34% of the teams were made up of graduate students. 

Rules and regulations

The students used the CQG integrated trading platform in order to execute their trades on the CME Globex platform. The 10 tradable futures contracts included corn, crude palm oil, soybeans, live cattle, crude oil, natural gas, gold, 10-year U.S. Treasury notes, E-mini S&P 500 and Euro FX. If students failed to trade within the rules and regulations, their accounts suffered. Teams were penalized $10,000 each day if they traded anything other than the products listed above. Teams were also penalized $1,000 for each contract that was not liquidated by its expiration date. 

Finally, if a team lost 20% or more of its total available balance in one trading day, its accounts would be locked out for the day. In the preliminary round each team began with $100,000 in its account. For those teams that made it to the finals, their accounts then reset with a beginning account balance of $250,000. 

Winnings

The top 10% of teams competed in the final round. At the end of the competition, teams were ranked based on their account balances. Each student on the fourth place team was awarded $300; third place received $500 per student; second place team members were each awarded $700 and the first place students won $1,000 each. The top 10% ranked teams also received an invitation to the CME Group Day of Market Education Conference.

Daniel Sanabria from the 2015 CME Group Trading Challenge final four team from the University of Alabama at Birmingham says the challenge helped provide him with new opportunities in the trading world. Since competing, Sanabria has formed his own alternative asset management company. He credits his experience in the trading challenge as a source of inspiration. “My new venture offers a version of the strategy we implemented in the competition as a trading program for a small group of investors under a deminimis friends and family exemption from registration with the National Futures Association,” he says. “So far, I have raised $1 million in trading capital and the strategy has outperformed the returns of all major asset classes since its inception.” 

Clearly Sanabria has leveraged his experience. 

The Trading Challenge is meant to educate students about trading, and Sanabria is a testament to that. “The best part of the competition is that it enables an experience for students that is very close to the daily reality of a futures trader,” he says. Sanabria was amongst the group invited for the Trading Day conference. He was excited about the exclusive look he was able to gain into the day-to-day operations at the CME, as well as meeting current CME members, and networking with some of the largest proprietary trading firms in the industry. The 2016 CME Trading Challenge was the 13th annual competition.

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