Kellen Hayes (MFIN '10), seated right, watches the market during the crude oil trading session as competition judge Tom Perry, standing, looks on.
Twenty-eight of the nation’s best student traders traveled to New Orleans on Nov. 14 to test their skills trading simulated live oil and gas futures, but unlike most competitions, the winners of this event weren’t necessarily the ones with the biggest profits.
The Tulane Energy Trading Competition was the first university trading competition to reward participants for using strategies to minimize risk. While other competitions award prizes based solely on profits, the Tulane Energy Trading Competition used a method for measuring risk—the so-called Ulcer Index—to penalize students who took on too much risk. Serving as judges were executives from top energy and trading firms, who quizzed students on their strategies and watched closely as they executed their trades.
“The idea was to create a trading competition that is more aligned with what employers want in the marketplace,” says Joe LeBlanc, assistant director of the Tulane Energy Institute and organizer of the competition. “We think that by adjusting for risk, combining several different performance measures and using the best trading software from Trading Technologies and Thomson Reuters, we’re creating a competition that rewards responsible trading and more accurately reflects the way trading is truly practiced in today’s energy firms.”
Aneal Tenjarla of the University of Texas won first place in the competition, Stephen Cacioppo of the Freeman School came in second, and Matt Gitelis of the University of Illinois took third place. The Freeman School’s Kellen Hayes and Carnegie Mellon’s Alexander Kirov placed fourth and fifth respectively. Top winners could choose between a cash prize and internships with trading firms such as Webster Capital, Mirant Corp. and TXU/Luminant.
Tenjarla said the contest was a great opportunity to learn trading strategy from industry insiders in a realistic environment that felt like an energy trading firm.
“This is probably the closest thing you can get to actually trading besides committing actual value and risking actual money,” says Tenjarla, who plans to work as a financial analyst after graduation. “Before this competition, I really didn’t know much about different trading strategies, different patterns of trading or how to use this technology. By the end of this, I felt like I got a good education.”
Stephen Cacioppo (MFIN '10) won an internship with Webster Capital for his second-place finish in the competition.
“I think what most impressed me was the realism and the fact that the competition was judged by experts in the industry,” says Cacioppo, who won an internship with Webster Capital for his performance. “They asked us questions about why we did what we did, and we were able to get some great feedback on strategy.”
The event’s judges gave the competition high marks for helping to teach students the importance of risk management.
“They are trying to show people how to take risks properly and that there actually are downsides to how you approach trading,” says competition judge Parker Drew, managing director of RBS Sempra Energy. “They are trying to make people have to make cogent risk decisions or what I call ‘skin in the game.’”
Competition judges watch live results on the Trading Center's displays during the competition.
In addition to RBS Sempra Energy, the competition featured judges from Mirant Corp., TXU/Luminant, Geneva Trading, Sequent Energy, Webster Capital, Aardvark Energy, ConocoPhillips, CitiGroup, Entergy Corp., Shell Trading, LIM, Johnson Rice and Goldman Sachs.
The competition took place in the Trading Center, the Freeman School’s state-of-the-art electronic trading classroom. Participants used Trading Technologies’ X_TRADER platform and Thompson Reuters charting software, the same tools used at leading energy firms.
“The bulk of energy trading activity has moved from the trading pits in New York and Chicago to computer screens,” says Leo Murphy, university program manager with Trading Technologies, one of the event’s sponsors. “For this reason, we felt it imperative to arm students with the same software that is used every day by professional traders.”
The 28 students who competed earned the right by participating in a team-based remote competition in October. Twenty-one teams from 13 business schools competed online over two weeks, using a mock $100,000 account to execute at least five trades per day. The top seven teams based on risk-adjusted return qualified to participate as individuals in New Orleans.
The Tulane Energy Trading Competition was presented by the Tulane Energy Institute and the Tulane Energy Club and was sponsored by CME Group, Trading Technologies and Thomson Reuters.
