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Journal of Education for Business
ISSN: 0883-2323 (Print) (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Incorporating Real-Time Financial Data Into
Business Curricula
Richard D. Holowczak
To cite this article: Richard D. Holowczak (2005) Incorporating Real-Time Financial Data Into
Business Curricula, Journal of Education for Business, 81:1, 3-8, DOI: 10.3200/JOEB.81.1.3-8
To link to this article: http://dx.doi.org/10.3200/JOEB.81.1.3-8
Published online: 07 Aug 2010.
Submit your article to this journal
Article views: 20
View related articles
Citing articles: 2 View citing articles
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http://www.tandfonline.com/action/journalInformation?journalCode=vjeb20
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Incorporating Real-Time Financial
Data Into Business Curricula
RICHARD D. HOLOWCZAK
BARUCH COLLEGE, CITY UNIVERSITY OF NEW YORK
NEW YORK, NEW YORK
ABSTRACT. The need to incorporate business and economic data into
curricula has been a driver of technology adoption in business schools. Webbased resources and professional data
services, such as Reuters and
Bloomberg, are being increasingly
adopted by business programs to meet
this need. There are clear trade-offs to
adopting either technological approach.
In this article, the author presents
examples of incorporating real-time
data from professional data services
into a variety of business topics.
S
everal colleges and universities
have created academic trading
rooms that include professional data and
news services that are on par with those
found at major brokerage houses, banks,
and other institutions in the financial services industry (Alexander, Heck, &
McElreath, 2001; Shim, 2003). A common feature of such trading rooms is the
real-time market data feeds that can be
used to populate graphs, spreadsheets,
quote displays, and other front-end applications. For most academic purposes,
however, the applications used the most
in business curricula rely on the ability to
query and manipulate historical data. As
the World Wide Web has matured, a number of stable and reliable commercial
Web sites now offer increasingly robust
access to financial data (e.g., Michelson
& Smith, 1999; Pettijohn, Ragan, &
Ragan, 2003; Woerheide, 1999; and
www.finance.yahoo.com). Given the
breadth and depth of data found online
for free (or at nominal cost to students),
the question arises as to the relative merits of maintaining dedicated academic
trading floors that support real-time data.
In this article, I aim to present a number of topics in business that lend themselves to investigation and demonstration
using real-time data from commercial
data providers. Clearly, such topics have
been covered by countless classroom lectures without the aid of technology,
beyond perhaps a financial calculator. I
believe that the examples presented here
provide an interesting perspective on
incorporating real-time financial data
into a business curriculum.
Our own trading floor, the Bert W. and
Sandra Wasserman Trading Floor–Subotnick Financial Services Center in the
Zicklin School of Business at Baruch
College, City University of New York
(CUNY), has been in operation since
2000 and contains a 40-workstation trading floor that receives real-time market
data and news via Reuters 3000Xtra service and the Reuters Kobra and PowerPlus Pro applications. Our trading floor
has had to deal with all of the issues presented in this article, and we have also
implemented a number of the examples
demonstrated below in dozens of
accounting, computer information systems, finance, economics, international
business, and management classes.
The remainder of this article is organized as follows. The following section
will outline the requirements for bringing real-time data into an academic trading room. Examples of two different
commercial data service tools are presented next, followed by examples of
topics that are amenable to supplementation using real-time data.
Working With Real-Time Data in
an Academic Trading Room
A number of issues require due consideration when real-time market data
are to be delivered in a trading floor
environment. Each of the leading data
providers, Reuters/Bridge, Bloomberg,
September/October 2005
3
Downloaded by [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 17:49 12 January 2016
Tradestation, eSpeed, and others, have
multiple delivery options that include
dedicated integrated services digital network (ISDN), digital subscriber line
(DSL), or leased line (T1 in North
America or E1 service in Europe) circuits, and direct delivery over the institution’s existing Internet connection.
Leased or dedicated lines have the
advantage of reliability and performance
guarantees, but require dedicated hardware and possibly costly monthly service fees (depending on location) to support them. For example, a T1 circuit in
Manhattan costs between $300 and $500
per month to lease. At first, delivering
data over an institution’s existing Internet link may appear as an attractive and
cost-effective alternative, given that an
existing network infrastructure is
already in place. However, as the number of simultaneous users of real-time
data increases, the institution may find
its Internet connection saturated to the
point of uselessness. Upgrading the
entire institution’s Internet link may then
prove too costly. The good news is that
the cost of bandwidth and telecommunications services in general has steadily
decreased while, at the same time, data
providers have put effort into making
Internet data delivery more efficient.
In addition to the basic telecommunications services costs and the cost of
software client licenses, exchanges
charge separate data access fees that are
passed along to the end user via the data
provider. For example, the New York
Mercantile Exchange typically charges
$60 per terminal (workstation) per
month for access to real-time data from
its commodities exchanges. Access to
real-time stock futures data in the
Euronext-LIFFE market currently costs
$33 per terminal per month.
Some schools have been successful
at lobbying for exchange fee waivers.
The general argument given is that students do not actually trade based on
the data and, therefore, do not profit
financially from the use of the data.
Along the same lines, exchanges have
an incentive to get their data into the
hands of students so that they will
come to embrace the specific exchange
once they are in the working world.
Many U.S. exchanges, including NASDAQ, already recognize this and pro4
Journal of Education for Business
vide formal application processes to
have exchange fees waived. European
markets are beginning to respond to
similar requests.
A final hurdle that must be overcome
is for faculty and students, the ultimate
users of the data products, to learn how
to access and manipulate real-time data
using the software tools provided by
each vendor. Such tools are typically not
user friendly and are aimed at professionals, possibly specialists in the financial services industry. Such users tend to
view a relatively small subset of the vast
universe of data provided by market data
services. In contrast to this, students are
keen to learn a much broader range of
tools and, given the time, will seek to
diversify their skills in using these software tools to improve their employment
prospects. Providing in-depth instruction into the workings of any one of the
major services mentioned above
requires enormous effort on the part of
both the instructor and the student. This
is especially true when contrasted with
the plethora of “wizard-driven” applications students regularly encounter in
modern computer labs.
In general, real-time data can be
accessed through either specific client
software provided by the data vendor or
a link to a spreadsheet program
(Microsoft Excel). For example, Reuters
FIGURE 1. Reuters Kobra application.
offers the Kobra front-end application
(see Figure 1), with a wide range of
capabilities including quotations, charting, NASDAQ Level II quotes (see Figure 2), and a variety of other tools used
to access market data and news. The
Reuters Kobra application provides
many prebuilt screens as well as the
capability to design custom screens such
as the one shown in Figure 1.
While excellent for demonstration
purposes, these applications do not
lend themselves to customized model
building. For these purposes, bringing
data directly into a spreadsheet provides students with the ability to create
their own models and analyses from
scratch. An example of the Reuters
PowerPlus Pro spreadsheet is shown in
Figure 3. PowerPlus Pro provides a
series of functions that are used to
access historical and real-time data.
For example, the function RtGet
(“IDN_SF”, “CSCO.OQ”, “BID”)
retrieves the bid price for Cisco on the
NASDAQ exchange. This link is then
made live so that it updates in real-time
as the best bid price changes in the
underlying market. In Figure 3, row 6
displays IBM quotes from the NYSE
and row 7 displays the Dreyfus New
York Municipal Income, Inc. fund,
whose shares are traded on the AMEX.
Row 8 displays the e-Mini S & P 500
Downloaded by [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 17:49 12 January 2016
and not the NYSE. Hence, row 11 displays only the last trade price and volume-weighted average price (VWAP)
for IBM on a delayed feed.
Business Topics and
Real-Time Data
FIGURE 2. Reuters Kobra application displaying NASDAQ Level II quotes
for Cisco Systems.
The ability to bring live pricing data
into a spreadsheet (a tool with which all
business students are assumed to be
familiar), can be a powerful mechanism
by which a number of topics in business
can be demonstrated. The examples that
follow have been adapted from exercises developed for our undergraduate and
graduate business students at the Zicklin
School of Business at Baruch College.
Simulated Equities Trading
FIGURE 3. PowerPlus Pro with real-time data for NASDAQ and NYSE
stocks, currencies, futures, and commodities.
FIGURE 4. Spreadsheet using the Bloomberg Excel add-in showing realtime data for NASDAQ equities.
futures contract with a March 2004
expiration date. Row 9 displays currency data aggregated from several
markets by Reuters, with the current
Euro quote provided by Barclays.
Finally, row 10 displays an electronically traded corn futures contract with
a March 2004 delivery date that is traded on the Chicago Board of Trade.
Similar functions exist as part of an
Excel plug-in for Bloomberg, as shown
in Figure 4. For example, the function
BLP (“CSCO UQ Equity “, , , ” [BID]
”) will retrieve the most recent, best
bid price for Cisco. The link is then
made live so that it updates in realtime. Figure 4 also shows the hazards
of mixing real-time and delayed
quotes. At the time this spreadsheet
was created, our center only had permissions in place to receive real-time
data into Bloomberg from NASDAQ
A common exercise given in many
finance classes and trading contests is
for students to invest and manage a
hypothetical endowment (Liu &
Holowczak, 2000). Such exercises are
typically done using last trade prices
(on perhaps a 15 min delay using a free
Web site) or daily close prices, using a
Web site or newspaper as the data
source. The availability of real-time
quote data offers an opportunity for
students to go into more depth than
typical portfolio management exercises by providing the tools to learn in
more detail how a broker works a large
order (by breaking it into several
smaller orders, for example) and takes
a position in the market. At a minimum, students learn which side of the
market they need to be on (bid or ask)
and how to gauge their performance
against measures such as the VWAP.
The spreadsheet shown in Figure 5
makes use of Reuters PowerPlus Pro to
populate five main sections.
Live market data (shown in the
shaded cells) is presented including the
bid, ask, and last trade price, as well as
the VWAP for the day. This section
might be expanded to include many
more equities from different industries
and traded in different markets.
Students are given a cash endowment
($50,000 in this case) and are told to
invest in stocks by taking and closing
long positions. In this example, $36,404
has been put into the market to purchase
September/October 2005
5
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FIGURE 5. Order book and real-time prices for a hypothetical portfolio.
returns, and bid/ask spread losses. As a
project or assignment, it may be conducted over an hour, a day, or longer periods.
Each time the student opens up the
spreadsheet on the trading floor, prices
are updated and the positions adjust automatically.
At a minimum, this exercise reinforces
the concepts of the double-auction market and could be a starting point for students studying market microstructure.
Although this simple example has limitations, it is relatively straightforward to
expand it to include features such as limit
orders, commissions on transactions,
spreading a large order over a period of
time using the available bid and ask lot
sizes, measuring each trade against
VWAP as a performance metric, or calculating portfolio betas to keep risk in
check. Other dimensions that could be
explored are to allow short selling or to
make use of different instruments (e.g.,
options on stocks or commodities
futures) altogether.
Arbitrage
FIGURE 6. Equities arbitrage example.
shares. The current market value is an
indication of what the balance would be
if outstanding shares were liquidated at
the current bid price.
When shares are purchased, the current ask price is copied down and the
cash balance decremented. In this
example, 1,000 shares of Microsoft
were purchased at $25.46.
When shares are sold, the bid price is
copied down and the profit or loss on
the sale noted while the cash is added
back into the current cash balance. In
6
Journal of Education for Business
this example, 500 shares of Microsoft
were sold at $25.60 and 200 shares were
sold at $25.34.
This exercise can be constructed and
used by students within a single class
period. As students build the spreadsheet
step by step, they are required to understand the relationships among the data
and the formulas and functions required
to perform the necessary calculations.
Because the data update in real-time, students witness firsthand concepts such as
slippage, volume-weighted price or
A second example of the power of
real-time market data is as a demonstration of equity arbitrage. When a
company’s stock trades in two different markets, opportunities may exist to
purchase a stock in one market with
that market’s local currency and sell it
in another market to take advantage of
discrepancies in the individual market’s prices. The objective of this exercise is to show students how a particular kind of arbitrage can be carried out
and to concretely show the relationships among the required instrument
prices.
Figure 6 shows an example of an equity arbitrage model working in several different markets. Reuters PowerPlus Pro
brings in live equity prices and currency
prices. One must then set up formulas to
represent the bid and ask prices in U.S.
currencies. As students construct this
model, they are again required to confront issues such as international currencies, exchange rates (e.g., exchanging
U.S. dollars for British pounds to purchase stock in the London exchange),
how currencies and equities are quoted in
different markets (e.g., London quotes
equities in lots of 100 shares), and the rel-
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ative liquidity and spread (difference
between bid and ask prices) on these
instruments in different markets.
At the time this figure snapshot was
taken, an arbitrage opportunity existed
by buying shares of Cisco in the NASDAQ market (at $18.59 ask price) and
selling them in the London market (at
$18.747 bid). Conditional formatting
(an Excel feature) can be used so that
the cells highlight a different color
when the arbitrage opportunity exists.
Additional extensions can be made as
shown to include other financial markets. To follow up on this model, students might be assigned to extend the
model to include transaction fees and
other trading costs. The use of real-time
data is a requirement for this exercise
and generates considerable excitement
among students as they build and use
arbitrage models.
Subotnick Center Live Events
A final example of the use of realtime data is the presentation of special
live events that affect the financial
markets. Breaking news events can
have significant impact on financial
markets. When the U.S. Federal
Reserve chairman testifies before Congress or presents open-market commit-
tee rate adjustment decisions, when
world leaders reveal major policy decisions, or when corporate leaders present news releases and performance
statistics, financial markets around the
world react within seconds, often with
significant impact on the pricing of
financial instruments and the volume
of transactions.
Live news coverage of such events
coupled with live market data provide
a robust and intriguing environment in
which students can witness and apply
theoretical notions of finance and economics to a real-world context. A Federal Reserve committee decision to
lower the prime rate, for example, has
implications for everything from bond
pricing and equity pricing to the rates
on student loans, mortgages, and credit card premiums. Such real-world
examples, supported by real-time
financial market data and juxtaposed
with live video or audio of the events,
serve to reinforce in students’ minds
the many relationships between financial and economic concepts and provide an ideal complement to the related theory they have learned in the
classroom. The Subotnick Center
holds live events for Federal Reserve
Open Market Committee reports,
Beige Book releases, and major politi-
cal events such as President Bush’s
8:00 p.m. “deadline for Iraq” broadcast
on March 18, 2003. Such events occur
at least once a week during a given
semester.
An example of a Subotnick Center
Live Event held on February 11, 2004,
is shown in Figure 7. The equity markets are represented by the e-Mini S &
P Futures contract in the top quote and
graph windows, and the bond markets
are represented by the U.S. Treasury
futures (March 2004 expiry). U.S. Federal
Reserve
Chairman
Alan
Greenspan’s testimony began at approximately 10:30 a.m. As in most cases
when he is speaking about the economy,
the market reacts to each sentence. For
example, as he completes a sentence
about his view of unemployment rates,
the equity market will tick in accordance. As can be seen in the figure, a
full transcript of Greenspan’s testimony
was released at 11:00 a.m., at which
time it was revealed that the U.S. Federal Reserve would not raise rates and was
unlikely to raise rates in the near future.
The reaction in the market was instant,
as evidenced by the jump in equity
prices as well as a short-term jump in
the bond market. We also have the ability to record the market data and video
and to play back the synchronized presentation to classes that meet later in the
day or at any other convenient time.
Summary
FIGURE 7. Open Market Committee testimony with live data and news.
New technological enhancements to
business curricula seem to appear
every day, and incorporating educational technology of any kind into a
curriculum has never been a trivial
task. In business education, the ability
to work with Internet and Web
resources as well as office productivity
tools, including spreadsheets, is virtually mandatory for every student.
While there are some pitfalls encountered when working with Internet and
Web resources, assignments and projects that use such resources are
becoming commonplace. I have
demonstrated examples that go one
step further by introducing exercises
that take advantage of real-time delivery of market data and the tools to
manipulate such data.
September/October 2005
7
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REFERENCES
Alexander, J. C., Heck, C. C., & McElreath, R. B.
(2001). A guide to building a university trading
room. Financial Services Review, 10(1–4),
209–220.
Liu, L. G., & Holowczak, R. D. (2000). Using
the Reuters 3000Xtra system for financial
information education. Online Information
8
Journal of Education for Business
Review: The International Journal of Digital
Information Research and Use, 24(5),
371–380.
Michelson, S., & Smith, S. D. (1999). Applications of WWW technology in teaching
finance. Financial Services Review, 8,
319–328.
Pettijohn, J. R., Ragan, G. A., & Ragan, K. P.
(2003). E-FM: A project for the introductory
financial management course designed to involve
students with online financial information and
analytical tools. Journal of Economics and
Finance Education, 2(1), 10–17.
Shim, S. (2003, January/February). Trade secrets.
BizEd, 2(2), 22–27.
Woerheide, W. (1999). The Internet in the personal
finance course. Financial Services Review, 8,
305–317.
ISSN: 0883-2323 (Print) (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Incorporating Real-Time Financial Data Into
Business Curricula
Richard D. Holowczak
To cite this article: Richard D. Holowczak (2005) Incorporating Real-Time Financial Data Into
Business Curricula, Journal of Education for Business, 81:1, 3-8, DOI: 10.3200/JOEB.81.1.3-8
To link to this article: http://dx.doi.org/10.3200/JOEB.81.1.3-8
Published online: 07 Aug 2010.
Submit your article to this journal
Article views: 20
View related articles
Citing articles: 2 View citing articles
Full Terms & Conditions of access and use can be found at
http://www.tandfonline.com/action/journalInformation?journalCode=vjeb20
Download by: [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RA JA ALI HA JI
TANJUNGPINANG, KEPULAUAN RIAU]
Date: 12 January 2016, At: 17:49
Downloaded by [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 17:49 12 January 2016
Incorporating Real-Time Financial
Data Into Business Curricula
RICHARD D. HOLOWCZAK
BARUCH COLLEGE, CITY UNIVERSITY OF NEW YORK
NEW YORK, NEW YORK
ABSTRACT. The need to incorporate business and economic data into
curricula has been a driver of technology adoption in business schools. Webbased resources and professional data
services, such as Reuters and
Bloomberg, are being increasingly
adopted by business programs to meet
this need. There are clear trade-offs to
adopting either technological approach.
In this article, the author presents
examples of incorporating real-time
data from professional data services
into a variety of business topics.
S
everal colleges and universities
have created academic trading
rooms that include professional data and
news services that are on par with those
found at major brokerage houses, banks,
and other institutions in the financial services industry (Alexander, Heck, &
McElreath, 2001; Shim, 2003). A common feature of such trading rooms is the
real-time market data feeds that can be
used to populate graphs, spreadsheets,
quote displays, and other front-end applications. For most academic purposes,
however, the applications used the most
in business curricula rely on the ability to
query and manipulate historical data. As
the World Wide Web has matured, a number of stable and reliable commercial
Web sites now offer increasingly robust
access to financial data (e.g., Michelson
& Smith, 1999; Pettijohn, Ragan, &
Ragan, 2003; Woerheide, 1999; and
www.finance.yahoo.com). Given the
breadth and depth of data found online
for free (or at nominal cost to students),
the question arises as to the relative merits of maintaining dedicated academic
trading floors that support real-time data.
In this article, I aim to present a number of topics in business that lend themselves to investigation and demonstration
using real-time data from commercial
data providers. Clearly, such topics have
been covered by countless classroom lectures without the aid of technology,
beyond perhaps a financial calculator. I
believe that the examples presented here
provide an interesting perspective on
incorporating real-time financial data
into a business curriculum.
Our own trading floor, the Bert W. and
Sandra Wasserman Trading Floor–Subotnick Financial Services Center in the
Zicklin School of Business at Baruch
College, City University of New York
(CUNY), has been in operation since
2000 and contains a 40-workstation trading floor that receives real-time market
data and news via Reuters 3000Xtra service and the Reuters Kobra and PowerPlus Pro applications. Our trading floor
has had to deal with all of the issues presented in this article, and we have also
implemented a number of the examples
demonstrated below in dozens of
accounting, computer information systems, finance, economics, international
business, and management classes.
The remainder of this article is organized as follows. The following section
will outline the requirements for bringing real-time data into an academic trading room. Examples of two different
commercial data service tools are presented next, followed by examples of
topics that are amenable to supplementation using real-time data.
Working With Real-Time Data in
an Academic Trading Room
A number of issues require due consideration when real-time market data
are to be delivered in a trading floor
environment. Each of the leading data
providers, Reuters/Bridge, Bloomberg,
September/October 2005
3
Downloaded by [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 17:49 12 January 2016
Tradestation, eSpeed, and others, have
multiple delivery options that include
dedicated integrated services digital network (ISDN), digital subscriber line
(DSL), or leased line (T1 in North
America or E1 service in Europe) circuits, and direct delivery over the institution’s existing Internet connection.
Leased or dedicated lines have the
advantage of reliability and performance
guarantees, but require dedicated hardware and possibly costly monthly service fees (depending on location) to support them. For example, a T1 circuit in
Manhattan costs between $300 and $500
per month to lease. At first, delivering
data over an institution’s existing Internet link may appear as an attractive and
cost-effective alternative, given that an
existing network infrastructure is
already in place. However, as the number of simultaneous users of real-time
data increases, the institution may find
its Internet connection saturated to the
point of uselessness. Upgrading the
entire institution’s Internet link may then
prove too costly. The good news is that
the cost of bandwidth and telecommunications services in general has steadily
decreased while, at the same time, data
providers have put effort into making
Internet data delivery more efficient.
In addition to the basic telecommunications services costs and the cost of
software client licenses, exchanges
charge separate data access fees that are
passed along to the end user via the data
provider. For example, the New York
Mercantile Exchange typically charges
$60 per terminal (workstation) per
month for access to real-time data from
its commodities exchanges. Access to
real-time stock futures data in the
Euronext-LIFFE market currently costs
$33 per terminal per month.
Some schools have been successful
at lobbying for exchange fee waivers.
The general argument given is that students do not actually trade based on
the data and, therefore, do not profit
financially from the use of the data.
Along the same lines, exchanges have
an incentive to get their data into the
hands of students so that they will
come to embrace the specific exchange
once they are in the working world.
Many U.S. exchanges, including NASDAQ, already recognize this and pro4
Journal of Education for Business
vide formal application processes to
have exchange fees waived. European
markets are beginning to respond to
similar requests.
A final hurdle that must be overcome
is for faculty and students, the ultimate
users of the data products, to learn how
to access and manipulate real-time data
using the software tools provided by
each vendor. Such tools are typically not
user friendly and are aimed at professionals, possibly specialists in the financial services industry. Such users tend to
view a relatively small subset of the vast
universe of data provided by market data
services. In contrast to this, students are
keen to learn a much broader range of
tools and, given the time, will seek to
diversify their skills in using these software tools to improve their employment
prospects. Providing in-depth instruction into the workings of any one of the
major services mentioned above
requires enormous effort on the part of
both the instructor and the student. This
is especially true when contrasted with
the plethora of “wizard-driven” applications students regularly encounter in
modern computer labs.
In general, real-time data can be
accessed through either specific client
software provided by the data vendor or
a link to a spreadsheet program
(Microsoft Excel). For example, Reuters
FIGURE 1. Reuters Kobra application.
offers the Kobra front-end application
(see Figure 1), with a wide range of
capabilities including quotations, charting, NASDAQ Level II quotes (see Figure 2), and a variety of other tools used
to access market data and news. The
Reuters Kobra application provides
many prebuilt screens as well as the
capability to design custom screens such
as the one shown in Figure 1.
While excellent for demonstration
purposes, these applications do not
lend themselves to customized model
building. For these purposes, bringing
data directly into a spreadsheet provides students with the ability to create
their own models and analyses from
scratch. An example of the Reuters
PowerPlus Pro spreadsheet is shown in
Figure 3. PowerPlus Pro provides a
series of functions that are used to
access historical and real-time data.
For example, the function RtGet
(“IDN_SF”, “CSCO.OQ”, “BID”)
retrieves the bid price for Cisco on the
NASDAQ exchange. This link is then
made live so that it updates in real-time
as the best bid price changes in the
underlying market. In Figure 3, row 6
displays IBM quotes from the NYSE
and row 7 displays the Dreyfus New
York Municipal Income, Inc. fund,
whose shares are traded on the AMEX.
Row 8 displays the e-Mini S & P 500
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and not the NYSE. Hence, row 11 displays only the last trade price and volume-weighted average price (VWAP)
for IBM on a delayed feed.
Business Topics and
Real-Time Data
FIGURE 2. Reuters Kobra application displaying NASDAQ Level II quotes
for Cisco Systems.
The ability to bring live pricing data
into a spreadsheet (a tool with which all
business students are assumed to be
familiar), can be a powerful mechanism
by which a number of topics in business
can be demonstrated. The examples that
follow have been adapted from exercises developed for our undergraduate and
graduate business students at the Zicklin
School of Business at Baruch College.
Simulated Equities Trading
FIGURE 3. PowerPlus Pro with real-time data for NASDAQ and NYSE
stocks, currencies, futures, and commodities.
FIGURE 4. Spreadsheet using the Bloomberg Excel add-in showing realtime data for NASDAQ equities.
futures contract with a March 2004
expiration date. Row 9 displays currency data aggregated from several
markets by Reuters, with the current
Euro quote provided by Barclays.
Finally, row 10 displays an electronically traded corn futures contract with
a March 2004 delivery date that is traded on the Chicago Board of Trade.
Similar functions exist as part of an
Excel plug-in for Bloomberg, as shown
in Figure 4. For example, the function
BLP (“CSCO UQ Equity “, , , ” [BID]
”) will retrieve the most recent, best
bid price for Cisco. The link is then
made live so that it updates in realtime. Figure 4 also shows the hazards
of mixing real-time and delayed
quotes. At the time this spreadsheet
was created, our center only had permissions in place to receive real-time
data into Bloomberg from NASDAQ
A common exercise given in many
finance classes and trading contests is
for students to invest and manage a
hypothetical endowment (Liu &
Holowczak, 2000). Such exercises are
typically done using last trade prices
(on perhaps a 15 min delay using a free
Web site) or daily close prices, using a
Web site or newspaper as the data
source. The availability of real-time
quote data offers an opportunity for
students to go into more depth than
typical portfolio management exercises by providing the tools to learn in
more detail how a broker works a large
order (by breaking it into several
smaller orders, for example) and takes
a position in the market. At a minimum, students learn which side of the
market they need to be on (bid or ask)
and how to gauge their performance
against measures such as the VWAP.
The spreadsheet shown in Figure 5
makes use of Reuters PowerPlus Pro to
populate five main sections.
Live market data (shown in the
shaded cells) is presented including the
bid, ask, and last trade price, as well as
the VWAP for the day. This section
might be expanded to include many
more equities from different industries
and traded in different markets.
Students are given a cash endowment
($50,000 in this case) and are told to
invest in stocks by taking and closing
long positions. In this example, $36,404
has been put into the market to purchase
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FIGURE 5. Order book and real-time prices for a hypothetical portfolio.
returns, and bid/ask spread losses. As a
project or assignment, it may be conducted over an hour, a day, or longer periods.
Each time the student opens up the
spreadsheet on the trading floor, prices
are updated and the positions adjust automatically.
At a minimum, this exercise reinforces
the concepts of the double-auction market and could be a starting point for students studying market microstructure.
Although this simple example has limitations, it is relatively straightforward to
expand it to include features such as limit
orders, commissions on transactions,
spreading a large order over a period of
time using the available bid and ask lot
sizes, measuring each trade against
VWAP as a performance metric, or calculating portfolio betas to keep risk in
check. Other dimensions that could be
explored are to allow short selling or to
make use of different instruments (e.g.,
options on stocks or commodities
futures) altogether.
Arbitrage
FIGURE 6. Equities arbitrage example.
shares. The current market value is an
indication of what the balance would be
if outstanding shares were liquidated at
the current bid price.
When shares are purchased, the current ask price is copied down and the
cash balance decremented. In this
example, 1,000 shares of Microsoft
were purchased at $25.46.
When shares are sold, the bid price is
copied down and the profit or loss on
the sale noted while the cash is added
back into the current cash balance. In
6
Journal of Education for Business
this example, 500 shares of Microsoft
were sold at $25.60 and 200 shares were
sold at $25.34.
This exercise can be constructed and
used by students within a single class
period. As students build the spreadsheet
step by step, they are required to understand the relationships among the data
and the formulas and functions required
to perform the necessary calculations.
Because the data update in real-time, students witness firsthand concepts such as
slippage, volume-weighted price or
A second example of the power of
real-time market data is as a demonstration of equity arbitrage. When a
company’s stock trades in two different markets, opportunities may exist to
purchase a stock in one market with
that market’s local currency and sell it
in another market to take advantage of
discrepancies in the individual market’s prices. The objective of this exercise is to show students how a particular kind of arbitrage can be carried out
and to concretely show the relationships among the required instrument
prices.
Figure 6 shows an example of an equity arbitrage model working in several different markets. Reuters PowerPlus Pro
brings in live equity prices and currency
prices. One must then set up formulas to
represent the bid and ask prices in U.S.
currencies. As students construct this
model, they are again required to confront issues such as international currencies, exchange rates (e.g., exchanging
U.S. dollars for British pounds to purchase stock in the London exchange),
how currencies and equities are quoted in
different markets (e.g., London quotes
equities in lots of 100 shares), and the rel-
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ative liquidity and spread (difference
between bid and ask prices) on these
instruments in different markets.
At the time this figure snapshot was
taken, an arbitrage opportunity existed
by buying shares of Cisco in the NASDAQ market (at $18.59 ask price) and
selling them in the London market (at
$18.747 bid). Conditional formatting
(an Excel feature) can be used so that
the cells highlight a different color
when the arbitrage opportunity exists.
Additional extensions can be made as
shown to include other financial markets. To follow up on this model, students might be assigned to extend the
model to include transaction fees and
other trading costs. The use of real-time
data is a requirement for this exercise
and generates considerable excitement
among students as they build and use
arbitrage models.
Subotnick Center Live Events
A final example of the use of realtime data is the presentation of special
live events that affect the financial
markets. Breaking news events can
have significant impact on financial
markets. When the U.S. Federal
Reserve chairman testifies before Congress or presents open-market commit-
tee rate adjustment decisions, when
world leaders reveal major policy decisions, or when corporate leaders present news releases and performance
statistics, financial markets around the
world react within seconds, often with
significant impact on the pricing of
financial instruments and the volume
of transactions.
Live news coverage of such events
coupled with live market data provide
a robust and intriguing environment in
which students can witness and apply
theoretical notions of finance and economics to a real-world context. A Federal Reserve committee decision to
lower the prime rate, for example, has
implications for everything from bond
pricing and equity pricing to the rates
on student loans, mortgages, and credit card premiums. Such real-world
examples, supported by real-time
financial market data and juxtaposed
with live video or audio of the events,
serve to reinforce in students’ minds
the many relationships between financial and economic concepts and provide an ideal complement to the related theory they have learned in the
classroom. The Subotnick Center
holds live events for Federal Reserve
Open Market Committee reports,
Beige Book releases, and major politi-
cal events such as President Bush’s
8:00 p.m. “deadline for Iraq” broadcast
on March 18, 2003. Such events occur
at least once a week during a given
semester.
An example of a Subotnick Center
Live Event held on February 11, 2004,
is shown in Figure 7. The equity markets are represented by the e-Mini S &
P Futures contract in the top quote and
graph windows, and the bond markets
are represented by the U.S. Treasury
futures (March 2004 expiry). U.S. Federal
Reserve
Chairman
Alan
Greenspan’s testimony began at approximately 10:30 a.m. As in most cases
when he is speaking about the economy,
the market reacts to each sentence. For
example, as he completes a sentence
about his view of unemployment rates,
the equity market will tick in accordance. As can be seen in the figure, a
full transcript of Greenspan’s testimony
was released at 11:00 a.m., at which
time it was revealed that the U.S. Federal Reserve would not raise rates and was
unlikely to raise rates in the near future.
The reaction in the market was instant,
as evidenced by the jump in equity
prices as well as a short-term jump in
the bond market. We also have the ability to record the market data and video
and to play back the synchronized presentation to classes that meet later in the
day or at any other convenient time.
Summary
FIGURE 7. Open Market Committee testimony with live data and news.
New technological enhancements to
business curricula seem to appear
every day, and incorporating educational technology of any kind into a
curriculum has never been a trivial
task. In business education, the ability
to work with Internet and Web
resources as well as office productivity
tools, including spreadsheets, is virtually mandatory for every student.
While there are some pitfalls encountered when working with Internet and
Web resources, assignments and projects that use such resources are
becoming commonplace. I have
demonstrated examples that go one
step further by introducing exercises
that take advantage of real-time delivery of market data and the tools to
manipulate such data.
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