High Finance: Sloan Opens State-of-the-Art Trading Room

Lee Ridgway

The Sloan School recently opened a fully equipped, state-of-the-art 
trading room - the first ever built on a university campus. Identical 
in every detail to the best trading rooms in financial capitals around 
the world, the Sloan facility provides MBA students with hands-on 
experience in trading and finance. It is also a lab in the traditional 
MIT sense, where research can be conducted in the areas of finance 
and financial engineering.

Today's financial markets would not be possible without significant 
technological resources. The Sloan trading room reflects this high-
tech environment. To give some idea of the technology involved, here 
is a quick tour of the Sloan facility.

At the front, near the ceiling, is that well-known symbol of 
financial markets, the electronic tickertape. While tickertapes in most 
trading arenas carry information from a single exchange, such as the 
New York Stock Exchange, Sloan's Trans-Lux Jet tape can carry price 
information from multiple markets, covering all 300,000 financial 
instruments worldwide; the software that makes this possible was 
written at MIT. Although supplied by Reuters as a live feed with the 
latest information, the Sloan tape is delayed by 15 minutes from 
real-world markets. To give added flexibility for teaching and setting 
up simulations, selections from the Reuters feed can be limited to 
certain stocks or bonds. (In a classic college touch, the phrase "No 
food or drink allowed!" occasionally appears among the price quotes.)

Underneath the tickertape are two Trans-Lux DataWall panels, which 
display late-breaking news and other financial information fed from 
Reuters. The DataWalls can also be controlled and fed locally, for 
tailoring to teaching and presentation situations.

Around the room are 23 trading stations, installed on desks designed 
and built by Woodtronics for trading rooms. These desks 
accommodate - neatly and stylishly - the connections, bundles of 
wires, computers, telephone stations, and necessary ventilation. The 
trading stations are Acer Pentium PCs. Placed among them are 23 IPC 
Tradenet MX telephones, consoles designed for fast-paced trading. 
These phones, while the real thing, are not connected to the outside 
world - no real trading takes place through them.

Supporting this setup is a series of servers, data feeds, databases, 
and network connections that help manage the entire operation, 
serve up real-time information, and provide historical data and 
information about financial instruments and companies. Such a high 
volume of data comes in via the network that the trading room is on 
its own MITnet subnet; otherwise, it would overwhelm the Sloan 
subnet.

Loaded onto the trading-room machines is a selection of software to 
manage and help make sense of the vast amount of available data. 
Included are packages for customizing the display environment, for 
analysis and visualization, and for portfolio management and trading. 
Two examples are the Reuters Personal Trader Workstation (PTW) 
and the Financial Trading System (FTS).

Reuters Personal Trader Workstation
This software, used by professional traders, offers graphics and 
spreadsheet analytical functions through links to real-time and 
historical data. With PTW the user can customize the PC's screen with 
numerous simultaneous windows, each with a different data service 
or application, including graphical manipulation and charting. With 
the Personal Data Dictionary, the user defines the data items that are 
to be fed into other applications.

Financial Trading System
This package, designed as an educational tool, links together a 
network of computers to form a financial market. With FTS a variety 
of financial instruments can be defined and traded, including stocks, 
bonds, options, and futures, as well as more complex securities such 
as caps, floors, and swaps. One class scenario might be a simulation 
where a trading environment is set up with artificial securities and 
the factors that affect their payoffs. FTS generates a random 
information structure and outcomes while the traders on the 
network make the market; FTS performs bookkeeping and 
networking tasks as if in a real market. Trading sessions with FTS 
have already been used in classes such as Investments (15.433), and 
in extracurricular activities.

Trading Room as Research Facility
While the Sloan trading room accurately reflects today's financial 
markets, it is also intended to be a research facility with the 
potential to play a central role in shaping innovations in the practice 
of finance. As with other research centers at MIT, cross-disciplinary 
collaboration is being encouraged. Possible avenues of research, some 
already under way, include projects to develop novel visualization 
techniques for representing complex portfolios; studies on the 
psychology of financial markets and how human behavior influences 
trading decisions; and computational techniques that incorporate 
artificial intelligence and neural-network theory in order to evaluate 
and learn, at a very sophisticated level, from past market experience.

In the area of visualization, a complex portfolio might be 
represented in a kind of 3D, color landscape. By "flying" over this 
landscape, a fund manager would be able to analyze the complicated 
relationships among the portfolio's components, and gain a better 
understanding of related performance and management issues.

Another aspect of the Sloan trading room is reflected in the 
enthusiasm shown for it by faculty, staff, and students. A grassroots 
movement, initiated by students interested in financial technology, 
resulted in the formation of the Trading Room Task Force. Informal 
and self-organized, student groups work on developing curriculum 
applications. A coordinating committee, headed by Professors 
Andrew Lo and Paul Asquith, monitors the students' work and 
integrates their efforts into the overall capabilities of the lab.

For more information on the Sloan trading room, see the Web pages 
at

http://web.mit.edu/sloan-comp/www/trader/