UH Bauer Students Claim Six of the Top 10 Spots in CME Open Outcry
For 10 years, the University of Houston C. T. Bauer College of Business has been home to the Open Outcry Competition ― a test of students’ ability to buy and sell oil contracts to each other using an age-old trading language that uses fast-paced hand signals and shouting.
The contest, organized and run by the Finance Association, a student group at Bauer College, simulates the experience of being a broker in the trading pits of New York and Chicago.
This year’s competition, sponsored by the Chicago Mercantile Exchange (CME) Group and held on campus the last Saturday in March, looked chaotic, but from the point of view of the judges, the day’s activities said a lot about the make-up of the students involved and something about how Houston’s energy scene has evolved.
For participants, it was an indication of whether they have the mental make-up to thrive in the quick reaction world of commodity trading.
“It shows if you can sort through this, distill the noise from the information and think on your feet and act,” said Deniese Huggins, vice president of finance for Sun Coast Resources in Houston.
Huggins started the competition while she was working in Houston for the New York Mercantile Exchange, or NYMEX, a previous sponsor of the competition. The market, which sets the benchmark prices for oil and natural gas futures, was trying to make deeper inroads in the energy business.
Ten years later, the energy industry, is now far more driven by the round-the-clock pulse of the financial markets.
“The old business is just coming to this lately. We are learning as we go and we don’t have the people,” said James Duncan, Director of Market Analysis for ConocoPhillips oil and gas. He noted that many of those in trading and marketing operations are nearing retirement.
The energy knowledge and skills make Houston the energy capital of the world. Maintaining that status will require talented people able to promote innovation in the traditional and alternative energy businesses.
“It is programs like the ones at University of Houston that help incubate that kind of growth,” said John Conolly, head of program development for the CME.
Trading has largely moved over to computer networks. While the students competing in the Open Outcry are not ever likely to work as floor traders, they can learn a lot from the experience.
Competing as a Bauer undergraduate had a big impact on Rafael Martinez Jr.
“The competition led me to be in trading now,” said Martinez, who recently moved into trading for Sequent Energy Management in Houston. In May he plans to complete his work on a master’s degree in finance at Bauer.
For others, the benefits range from a visceral experience with how markets work to a talking point in a job interview.
“It’s a good employee evaluation tool,” said Scott Hess, a New York trader with CME who helped start the competition and is still deeply involved. Watching a newcomer in action “can weed out those on the bubble.”
The Finance Association offers several training sessions to prepare students before the competition. But not all of this can be taught.
“You have to be aggressive, have social skills, be confident. You don’t think; you react,” said Charlie Satterfield, a consultant, who was one of the judges. He added that an analytical person who looks lost in a trading pit may be great buying and selling electronically.
In 2009, Tin Vuong won an internship at NYMEX in the electronic trading competition, which is also part of the CME challenge. This year the Bauer student placed fourth in the Open Outcry Competition.
Vuong said he wanted to do it because, “it’s the history of all that you are doing electronically. In the pits you can see all the emotions.”
By Stephen Rassenfoss