INSTRUCTIONS

2015 Utah Winter Finance Conference Trading Session

Summary

This year you will be endowed with claims issued against a pool of money. Across several trading rounds, you will be able to trade these claims on an electronic exchange system, Flex-e-Markets.

 

In addition to trading, you will also be able to submit the claims to us, ULEEF, to be cashed in for a known amount called the face value. This face value increases each trading round. The pool of money is used to pay those who want to cash in. Over time, the money in the pool grows but at a slower rate than the face value.

 

If there is insufficient money in the pool to honor the requested cash-ins at face value, the pool is put into liquidation and all outstanding claims will be paid pro rata.

 

Trading will last at most 5 rounds. Your final earnings depend entirely on the cash you hold at the end of the last round, minus the cash you are initially endowed with. Changes in cash are determined by your trading choices and cash-in decisions.

 

Acknowledgment: Funding for the 2015 UWFC trading exercise is provided by the U.S. National Science Foundation under grant SES-1426428

 

Details Of The Setup

This session is organized in trading Rounds. In Round 1, each of the N confirmed (see next page) participants holds one single claim for a total of N claims (N will be announced before Round 1 starts). Each claim has an initial face value of two dollars ($2). In Round 2 the face value increases to $5. The face value continues to grow in each subsequent Round. The face values in all Rounds are listed in red in the second column of the table below.

Each claim is issued against a pool of money.  The pool of money starts with exactly $N in Round 1. The face values of all outstanding claims add up to $2N. Thus, the money in the pool is insufficient to cover the face value of each claim if all claims are submitted for cash-in. If not liquidated, however, the remainder of the pool doubles in Round 2. The table below displays the per-ticket pool money at the end of each Round.

 

Round

Per ticket amount of money in pool if no cash-ins.

(or the growth rate if cash-ins)

                  Face Value

1 Thur Feb 5

Opens 9:30 AM

Closes 5:30 PM

 

$1

$2

2 Thur Feb 5

Opens 7:45 PM

Closes 7:30 AM Feb 6

 

$2

(Remaining pool doubles from Round 1)

$5

3  Fri Feb 6

Opens 9:30 AM

Closes 5:30 PM

 

$4

(Remaining pool doubles from Round 2)

$12

4 Fri Feb 6

Opens 7:45 PM

Closes 7:30 AM Feb 7

 

$8

(Remaining pool doubles from Round 3)

$25

5 Sat Feb 7

Opens 9:30 AM

Closes 6:00 PM

 

$16

(Remaining pool doubles from Round 4)

$50

 

 

When not enough money is available to honor the requested cash-ins, the pool is put into liquidation, and the remaining money is divided among all outstanding claims. If, say, $45 is left in the pool by Round 3, 5 claims are submitted for cash-in, the pool is put in liquidation. If, say, 30 claims are still outstanding, each claim fetches $45/30=$1.50.

 

Importantly, you will not know how many claims were submitted in any given Round (except your own, of course). As such, you will never be sure whether the pool will be put in liquidation until we announce so.  

 

In addition to claims, you will begin the session with some cash. Use this cash to purchase more claims if you wish. You can increase your cash either by selling claims in the open market or by submitting claims for cash-in. At the end of the trading exercise, all the cash you have minus the initial cash is yours to keep.

 

Trading And Requesting Cash-Ins

 

In each Round, you will be able to trade the claims among yourselves in a market called Claims. You can buy claims and thus increase the number of claims you held in the beginning of the Round, or sell claims, and thus decrease your claim allotment. Claims is a "public" market: everyone can see all orders that have been submitted, and trade always takes place at the best possible price.

 

In Claims, you are allowed to short sell claims (up to __). When you short sell, you keep the purchase price; however, if the buyer decides to submit your claim for cash-in, we will make YOU pay for the face value or liquidation payment (whichever applies to claims that were not acquired in a short sale). That is, we will take the payment out of YOUR cash, not the money pool. If you do not have enough cash, we will take away all your cash as penalty, and approach another shortseller to cover the liability.

 

During any trading Round and for 15 minutes after the conclusion of a Round you would be able to send a message through the Flex-E-Markets message window stating the number of claims you would like to cash in for that Round. If you do not want to cash in, do not send a message. The message should state your ID and the number of claims you would like to cash in. For example "Star88 2 tickets. "

ULEEF's message ID is "mc." This is whom you should send your cash-in message to.

 

When markets are paused at the end of a Round and the 15 minutes have elapsed, the following will happen:

 

1.      If the money pool is sufficient to cover the face values for all submitted claims, we will buy each submitted claim for the face value for that Round (as listed in the table above).  

2.      If there is not enough money in the pool to honor all claims at the face value, the pool will be put in liquidation. This means that all remaining claims (not only those submitted for cash-in) will receive the liquidation payment.

 

The liquidation payment is equal to the outstanding money in the pool divided by the number of outstanding claims.

 

The maximum number of Rounds is 5 (five). If at the end of any Round before Round 5, only one participant is still holding tickets, the session terminates automatically, and the remaining claims are paid the liquidation value.

 

Trading Platform

 

Trading (and claim submission) takes place online at http://uleef.business.utah.edu/flexemarkets. Log in with the ID and password that is on your claim certificate (in your conference packet). Navigate to the marketplace called "UWFC-2015." Make sure that you access this marketplace before the morning session of the first day of the conference, and that you send us ("mc") a message through the chat window stating "I'm in," so we have an exact count of the number of active participants, and hence, the size of the pool. (If the message recipient does not appear, refresh your browser window.)

 

The marketplace is organized as a traditional continuous open book system. All orders you submit are limit orders. More instructions on how to use the Flex-E-Markets platform are at http://www.flexemarkets.com/site/flex-e-markets-explained/.

 

Good luck!