EVERY week finance MSc students at Reading University imitate their counterparts on Wall Street and in the City of London, winning and losing millions as they play the financial markets in a bid to become star traders.

True, the money is only notional, and the dealing simulated. But, when the future “masters of the universe” are eyeballing and yelling at each other during the occasional open outcry session and making million-dollar decisions in split seconds, it certainly feels real enough.

Traders make the financial world go round. Millions of pounds change hands on a daily basis in the world’s financial markets, as everything from company shares, to the right to buy a specific quantity of pork bellies, is bought and sold for a price.

Many finance students find the lure of the highly competitive world of the trader irresistible, but not everybody is suited to the fast pace and intense pressures of the trading floor. Fortunately some MSc programmes provide the opportunity to practise trading without risking serious financial or emotional meltdown.

Michael Smith is a former Japanese equity trader who teaches on the MSc in international securities, investment and banking programme, at the International Capital Market Association Centre at Reading University. With two dealing rooms, and a third on its way, the centre will soon have 112 workstations – more than some investment banks.

“By taking the theory of managing the risk of an options or futures portfolio, and applying that in the dealing room, students learn so much more than they would do just from their books or from chalk and talk,” Smith says. Students trade and manage the risk of the asset class about which they are learning, so when they learn about bonds they manage bonds. Last term the students were trading currency options as market makers.

The key to a good trading simulation is ensuring a lifelike experience. The software replicates what would appear on a dealer’s screen, such as market prices and news from Reuters, Smith adds. Students act as market-makers, answering telephones, making prices and trying to make money.

Other institutions, such as the International University of Monaco, Durham Business School and Cass Business School also incorporate trading into their finance masters programmes. In Monaco, the hedge fund centre of the world, trading is a mandatory component of the finance MSc at the international university.

Victor Planas-Bielsa, director of the Hedge Fund Research Institute at the university, says: “We have access to Bloomberg and Reuters feeds and put students in real-life situations. I act as a fund manager and run trading exercises, with the class acting as my assistants. Students benefit from seeing the differences between the theory and reality, and learning how to work quickly and in stressful conditions.”

At Durham, students use the real-time data from its tailored stock market trading simulation “stock track”, to deal in shares, options, bonds and futures from several global exchanges. During a three-month-long competition, students hone their portfolio management skills.

George Alexandridis, deputy director of MSc programmes at Durham, says: “Stock Track helps to develop the students’ securities selection skills and investment awareness, learn from trading mistakes, and to get used to the demands of real-world trading.”

The students certainly appreciate the opportunity to get a taste of real trading conditions. Lars Terhaar, who took his masters in economics and finance at Durham Business School, says: “Stock Track was a very useful experience. We used it as a tool to close the gap between theory and practice. We tried to implement the trading strategies and situations that we talked about in class, whether it was value versus growth, technical trading, or reacting to mergers and acquisitions information.”

While some budding traders find that the dealing room environment does not suit them; others thrive on the experience.

Nick Craze, an equity trader at Barclays Global Investors, the asset management firm, and an alumni of the Reading markets centre, says “We did a lot of interdealing in the room, which helped with my communication skills, dealing with brokers as I do now.

“In fact, the trading room increased my enthusiasm to get involved on the trading side, and helped to set my present career path.”

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