You may have noticed that there has been a pretty severe financial crisis going on which has dominated the world’s headlines, giving millions of people severe headaches and sending blood pressure levels sky high all over the world. According to Ralph van Put, CUHK’s Business Faculty Adjunct Professor and CEO of Greater China Capital Investment Corporation, the reason everything fell apart had to do with a whole bunch of things - but mostly, it was just to do with a lack of smarts. The key then, he says, to averting a similar crisis in future is pretty simple: you train smarter professionals now that can populate the financial community in future who will hopefully serve us all a whole lot better than they have done previously.

 

As good a place to start as any, says van Put, is in the world’s trading rooms – and from there, the more traders who decide they want to move into other parts of the financial system the better, he thinks, particularly if they have been trained for what lies ahead inside the Finance Trading Lab at CUHK.

 

 “I strongly believe that the key flaws are the users of the systems and not the system itself,” he says, putting it succinctly. “By creating smarter academics in all the areas of the financial market – from the clearing houses, the dealing rooms, the regulators and exchanges, it should enable efficient and well controlled capital markets and avoid over regulation and new inefficiencies.”

 

The world of trading has changed enormously over the past 20 years, the length of time van Put has been in the game himself. Namely it’s changed from an open outcry system towards one that is fully automated – an electronic trading environment. Markets are now more accessible, spreads are smaller and the costs of trading are a whole lot less than they were before.

 

Despite electronic trading having started its life back in 1976 with the launch of Instinet in the United States, “the evolution of electronic trading” has only just begun on the mainland, he says, hence the Chinese have a lot to learn (and not just from everyone’s past mistakes).

 

But what makes a good trader, anyway? The stereotype of the classic trader is “a big guy shouting”, as van Put likes to put it, but being big and shouting a lot clearly won’t get you anywhere in an electronic world, he points out. “Now we try to find people in a completely different way,” he explains. “Of course he has to be good with figures but just shouting won’t work when you are sitting behind a machine. Nowadays behind the screens there are different qualities you need.”

 

One of them, not surprisingly, is simply being able to look at a screen for incredibly long periods of time. For that reason, of all the different kinds of people out there who would make great traders, online gamers can be a surprisingly good bet.

 

 “Why gamers?” he asks. “They can look at a screen for 200 hours and the typical character of a game player is one who can look at the screen and not even know the sun is shining behind him.”

 

But two key characteristics that were commonplace in the world of open outcry still remain the same today: “Creativity is very important in trading,” he says citing the first. “Discipline is too – you have to know when to cut your losses and run, so a good trader can cut his losses.”

 

But great traders are still surprisingly hard to come by, he notes, even today. “In my years as a trader three made good traders and only one of them – a PhD – made a good electronic trader,” he admits. “So the character of the person changed but knowing options, being creative, having discipline, being fast, it’s still the same.”

 

Most traders learn on the job, which is why the ones studying at the Finance Trading Lab will be in pole position, relatively speaking, when they go job-hunting after they graduate. “I believe that my students when they leave this school and work for the likes of Merrill Lynch, know the culture [of a trading floor], know how [traders] think.” And that is priceless to finance institutions out there looking for talent.

 

The system tools CUHK students are being trained up on in the Lab, are precisely the ones they will be using in the real world, thereby saving these organizations a lot of time and money. “It would normally take a company six months to get them up to speed. I can do that [here] in two semesters,” he says. “We use this software in the real world so if you left here and as an employee

I met you I would hire you immediately.”

 

The students being trained inside the Lab are working in simulated situations – they are using real market data but none of their trades actually reach the exchanges. “Of course the trades don’t go to the exchanges but it looks like it does. It doesn’t go to the exchanges but you are trading real prices,” he notes.

 

“The level of this course is unique. The people who are teaching in it are not just me. We have five people who are traders, one is in arbitrage, one in algorithms, one long/short trader and two engineers using RTS Tango and one guy is from ABN AMRO who does the networking. Half of the program is theory and the other half is a project we give them so they develop a strategy based on that. So they start researching it, they start trading and then they present it to us. This is about creativity not just money – it is about how they find stocks, what were the correlations, it’s the whole project from A-Z.”

 

A prerequisite for joining this course is a basic knowledge in options and futures – and a sound appreciation for the work of John Hull, who wrote “the bible on options trading”, Options, Futures, and Other Derivatives. “The whole world uses this book.” And as far as van Put is concerned, for students who complete this course, two things are for sure. One, they know what they want to do with their lives (“The guy who goes from this class knows that he wants to be a trader”); and two, they stand a very high chance of being hired straight away. “For a company and finding talented people, it is very interesting for them. These people are 22 years old and if I knew this at 22 years old my career would have been very different,” he says.

 

Believe it or not, the world is still short of good finance people. So the singular aim of this new Lab is to create lots of good finance prospects – and for some students that will mean becoming a straight-out trader, while for others it will mean moving into another part of the system.

 

“I want my students to understand what a structured product is and what an option is. Not everyone will like trading so they may go to the FSC and they bring this knowledge to [that area of the] business,” he says.

 

For all the students who train at this Lab, whether they become the traders of tomorrow, or the regulators – they are already ahead of the game, before they’ve even started playing it.

 

It’s not every day that the world’s financial institutions collectively hand over a tonne of free market data and a whole slew of financial intelligence gathering tools to an educational body for pretty much nothing in return. But that is exactly what happened to CUHK’s Business Faculty in late 2010 that enabled the creation of its Finance Trading Laboratory – and the benefactors of this extraordinary happening will be none other than the students of CUHK from now on.

 

The Lab is the brainchild of Professor Ralph van Put, CUHK’s Business Faculty Adjunct Professor and CEO of Greater China Capital Investment Corporation and CUHK’s Associate Professor Chow Ying Foon. Together, they drew on Professor van Put’s 20 year-long experience in the industry and his jam-packed Rolodex full of a “who’s who” of finance industry contacts to make their dream come true. And that was to build a world-class Finance Trading Lab designed to nurture the global business leaders of tomorrow – right here in Hong Kong.