Trading Spaces, B-School Edition

(page 2 of 3)

In one, students take on the roles of either analysts or traders, with the analysts forecasting the earnings per share for several fictitious companies and then broadcasting these forecasts to traders, who are responsible for managing a portfolio of those stocks as well as bonds.

Still, in these days of desktop access to financial information, the trading rooms may be on their way to the land of anachronisms. At Carnegie Mellon, one of the first schools to open a trading room, the trading room was dismantled after the school decided a physical space devoted just to trading was unnecessary once the school began requiring all students to own a laptop.

The Atmosphere of the Floor

Sanjay Srivastava, who was a professor at Carnegie Mellon when he and a colleague developed the trading simulator software FTS (Financial Trading System) in the late 1980s, said simulations can now be run from any large classroom.

One downside of the dismantling, Srivastava says, was that the trading room had also served as a focal point for students interested in trading careers. That type of enthusiasm is difficult to recreate, he says, which is why the rooms serve a purpose more than just for show.

The University of Iowa's Tippie College of Business used to have a trading lab, but a representative says that with advancements in technology, having the space devoted to just one purpose became unnecessary. Now trading courses are taught in computer classrooms where trading programs share hard-drive space with specialized accounting and other software programs.

Beyond the Books

Srivastava says Pittsburgh-based FTS has about 60 active university users, about 20 in a trading room setting, with the remainder using it to create a virtual trading room via the Web. Srivastava says he has seen an uptick in business over the past few years as more trading rooms are built, but the biggest change, he says, is where the inquiries are coming from.

Previously, the typical adopter of FTS was a professor interested in using technology in the classroom to teach concepts not well-suited to textbooks. More recently, he's seen more interest from university deans, development officers, and other administrators.

Indeed, a session at last year's annual meeting of the Association for Collegiate Business Schools and Programs included a session on trading labs conducted by a representative from Rise Softools (now Rise Vision), a Kansas City-area provider of electronic display solutions. The session description highlighted how trading labs are becoming "powerful tools" in both recruitment and fund raising.

Your Name in Lights

Rise Vision's Lance Wipf says several Rise clients have found trading labs to be investments with unusually high returns. The money spent to build the lab (which can range from a hundred thousand to a few million dollars) is recouped within a few years by the increased donor contributions and increased exposure for the school.

Many schools have found that trading labs can provide a tangible focus for a capital campaign, as alumni who have gone on to make their fortunes in finance have proven willing to fund campus trading rooms, especially when naming rights come as part of the package.

One of the earliest donations in the $17 million capital campaign currently under way at the University of Richmond's Robins School of Business was from University trustee Stephen M. Lessing, managing director and head of client relationship management for Lehman Brothers, who pledged $900,000 for the Lessing Capital Markets Trading Room. At the University of Rhode Island, an alumnus donated $250,000 for the creation of the Bruce S. Sherman Trading Room, part of a $10.6 million facility renovation at the College of Business.