The first day working on a foreign exchange trading floor can be overwhelming. The atmosphere, the urgency and the sheer amount of money at play can make the experience daunting for many new traders.
Deakin Associate Professor Victor Fang remembers his first day at HSBC Bank in Malaysia in the late 1980s well.
‘I lost a lot of money and my boss said “that’s the tuition fee you pay to the market to learn”.’
Simulating an interbank FX trading floor, the Telstra Trading Room has the capacity to change this daunting prospect for students studying at Deakin Business School.
Launching on Open Day, 23 August, the facility is designed to give students a less confronting introduction to forex trading. The money they lose while they’re on their training wheels will be virtual, and they won’t be breaking the world’s economy with any bad calls.
The Telstra Trading Room, where classes start in trimester two, simulates a real inter-bank foreign currency trading floor, complete with 15 banks, both Australian and international, and large corporations such as BHP Billiton, Qantas and Telstra participating in the market.
‘This is about teaching students to trade,’ says Associate Professor Fang, who is coordinating the program utilising his experience as former chief foreign exchange trader with 10 years in banking.
He says the trading room is used to actually deliver his courses, unlike similar setups at other institutions, which are used mainly for student research.
‘The fifteen banks are trading with one another to make a profit,’ he says. ‘It allows students to apply the knowledge they have of economics and finance to a game based on real-life scenarios.’
At the beginning of each session, Associate Professor Fang gives students a briefing on what news the market should expect that day.
They have to digest that economic scenario, then form their own views about whether the currency is going to go up or down and write a pre-trading report about their views before each trading session begins,’ he says.
‘For example, the banks might expect the unemployment rate to be 6.5 per cent. But, when it comes to announcing the rate it may not be 6.5 per cent. Some banks might think the rate will be lower, so they start to buy before the news is released. Some might think it will be worse, so they start to sell before the news is released.’
Students work in teams of three: a dealer, responsible for formulating and carrying out transactions; a risk manager who identifies strategies and advises the dealer; and a position keeper who accounts for all transactions. This allows 45 students to take part in each session.
The group work is important. ‘To work in a group they have to understand how work flows from one party to another. Communication is important and working as a team is important,’ says Associate Professor Fang. ‘And if there is a dispute between banks, students have to resolve it themselves. This way they learn the skills of negotiation and problem-solving, too.’
The Telstra Trading Room is a progressive teaching space, placing Deakin Business School students at the cusp of the digital frontier. The teaching space will also be available to external companies and industry for training purposes.