RITC 2012 Case Package - Rotman International Trading ...

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Below is an information release schedule outlining when various news items will be released. Information Release Schedule Time (seconds) Indicator Released to 0 Month 1 Expectations (Provided Above) Everyone 50 Month 1 HBI Releases Everyone 100 Month 1 Qualitative News Everyone 150 Month 1 INV Releases Everyone 200 Month 1 Qualitative News Everyone 250 Month 1 GDP Releases Everyone 300 Month 2 Expectations Analysts Only … … … 1550 Month 6 HBI Releases Everyone 1600 Month 6 Qualitative News Everyone 1650 Month 6 INV Releases Everyone 1700 Month 6 Qualitative News Everyone 1750 Month 6 GDP Releases Everyone 1800 End of Heat Analysts Only Random Times Indicator Sensitivity Change Analysts Only Aside from the transactions done by traders in the Rotman Atrium, analysts in the trading lab are allowed to make up to three spot trades during each heat, with up to 100 contacts in each trade. The spot trades will be executed at the current spot price of the RT100 index posted on the screen. These trades will generally allow each team to have an opportunity to close out their positions in a very quick manner. Moreover, since the futures market will be driven by trader activity while the spot market is based on the actual economic indicators realized, there may be slight inefficiencies in the spot market and the futures market enabling arbitrage profits. These trades are added to the aggregate futures position of the team and are charged regular trading commissions. The soft and hard trading restriction limits discussed below will apply to trades made by analysts in the trading lab. Rotman International Trading Competition 2012 © Financial Research and Trading Lab, Rotman School of Management, U of T 16 Quantitative Outcry Case
Trading Limits and Transaction Costs Each team has a starting position of 0 contracts, a soft trading limit of 200 contracts and a fixed hard trading limit of 500 contracts on their net positions. Teams will be notified as they approach their soft and hard limits on a best efforts basis. If a team exceeds its soft limit, it will be charged a fee proportional to how much they exceed the soft limit. The amount by which a team exceeds the initial soft limit of 200 will become their new soft limit. The fee per contract above the soft limit is $250. For instance, if Team A’s net position is at 220, they will be charged a fee of $250 * 20 = $5000 (they have exceeded their soft limit of 200 by 20 contracts). For Team A, 220 is now the new soft limit. As long as Team A’s position remains below 220, there will be no additional fees. If Team A bought more and had a new net position of 280, then they would be charged an additional fee of $250 * 60 = $15000 (The difference between the new net position and new soft limit). If a team does not exceed its soft limit, it will not be charged any fees. Any team that exceeds the hard limit of 500 will be automatically disqualified from the outcry. They will be given a rank equal to that of last place for that outcry. In addition, there is a zero tolerance policy in regards to electronic communication. Any trader or analyst seen (by an RITC staff member) using or holding a cell phone during the trading heats will be immediately disqualified. RITC staff will be positioned throughout the pit and the trading lab to police this. Each contract will be charged a brokerage commission of $1 per contract. Position Close-Out Each team’s position will be settled at the end of the trading session by closing out their remaining positions at the final spot price. Analysts are not graded based on their estimates, though accurate estimates generate higher trading profits. Key Objectives Objective 1: Generate profits by interpreting news headlines and going long on positive news and short on negative news. Objective 2: Design a model to quantify the impact of news on the value of the index to add precision to your interpretation of news releases. Develop effective communication methods between traders and analysts to quickly communicate trading strategies based on an analysis of the news releases. Objective 3: Capitalize on arbitrage opportunities when there is a divergence between the spot and futures market. Utilize the three spot trades awarded to analysts at optimal times to maximize profits. Rotman International Trading Competition 2012 © Financial Research and Trading Lab, Rotman School of Management, U of T 17 Quantitative Outcry Case
Page 1 and 2: Case Package 2012 Rotman Internatio
Page 3 and 4: About RITC The Rotman International
Page 5 and 6: Additional Support Files Additional
Page 7 and 8: Options Trading New to RITC 2012, t
Page 9 and 10: Position Close-Out and Case Scoring
Page 11 and 12: Sales & Trader Case Overview The Sa
Page 13 and 14: Key Objectives Objective 1: Generat
Page 15: ∆RT100 = (GDPA,n - GDPE,n)GDPS,n
Page 19 and 20: Assets Description Assets Capacity
Page 21 and 22: A pipeline can transport up to 10,0
Page 23 and 24: Thomson Reuters QED Case Overview T
Page 25 and 26: Secondly, the market may over or un
Page 27 and 28: Options Trading Case Overview The O
Page 29 and 30: Trading Limits and Transaction Cost
Page 31 and 32: Market Dynamics Each trader will be
Page 33: Appendix Some supplementary files w

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