For a comprehensive document of the structure and main features of the RIT, please download the following:

Structure and Main Features of the RIT Market Simulator Application

Simulation of Order Driven Markets

The Rotman Interactive Trader software package provides a complete and accurate simulation of order-driven markets. Users of RIT will be able to submit limit and market orders to a centralized limit-order book and transact with either other traders or computerized trading agents. Traders can participate in both call-auction markets and continuous auction markets.

Institutional-Strength Order Management System (OMS)

The Rotman Interactive Trader Client application conforms with the order management systems that are used by traders at major financial institutions. Traders have full control over the information displayed on their desktop and the layout of the information. Real-time data links allow traders to link data to Excel for further analysis and manipulation of information in the spreadsheet environment.

Order Management System (OMS) Features in RIT Order Management System (OMS) Features in Excel

API (Application Programming Interface) Support

Students are normally asked to submit their decision manually to the simulated market, using order entry screens and/or fast order entries inside the limit-order books. Alternatively, given the API support for low latency trading built into the RIT application, students can design and program algorithms to automate the entire decision and execution process for cases for which an automated strategy is appropriate. This option is useful for students to further develop their programming skills. The RIT platform provides VBA API and REST API functionality, so students can choose Excel VBA or any programming application that supports a REST API such as Matlab, Python, R, Node, or C#. API order submission speed can also be controlled by instructors.

Risk Management

The RIT Server includes a built-in risk management system similar to those used at institutional trading desks. Portfolio margin is used to calculate both net and gross risk/exposure that the trader currently has, and limits can be strictly enforced, or limit breaches can be logged.

Simulation of Financial Products

RIT allows traders to experience how various financial instruments trade. The securities currently supported by RIT, and their properties, are summarized below.

Equities - Instructors can design tradable equity instruments that are either traded solely by the trading crowd or including computer agents. Payoffs for equities such as dividends, as well as the final value of the equity, can be specified prior to the start of the case. Alternatively, instructors can set the final value of the equity security to be determined based on the last price of the period or a randomly chosen price from the last minute of the period. Trading costs can be specified on a per-share-basis.

Fixed Income - RIT supports both discount bonds and coupon bonds. Discount bonds are quoted and traded based on their price. Coupon bonds are quoted and traded based on their clean price and accrued interest is added to the transaction once a trade is made. Transaction costs for fixed income products also work on a per-unit basis. Computerized traders can participate in fixed income markets solely as uninformed noise traders.

Options - Both call and put options can be implemented in RIT cases to add speculative and hedging opportunities. Options are traded based on the equity convention of 1 contract being associated with 100 shares of the underlying. Commissions are charged based on a per-contract basis. Options cannot be exercised; their payoff is based on the difference between the strike price and last price of the underlying at the expiration of the contract, in other words, all contracts are cash settled at expiration.

Futures - Futures contracts can be traded using RIT and are marked-to-market when the position is closed or at the end of trading. This is done due to issues with market illiquidity causing mark-to-market irregularities. Required margin on futures is calculated based on a single maintenance margin amount. Futures must be linked to an underlying security for their final mark-to-market amount.

Commodities - The trading and processing of physical commodities is supported by the RIT platform. Traders can be required to lease storage prior to purchasing physical products, and can then use different physical assets (such as pipelines, ships, refineries, etc.) to convert or move these physical assets from one market to another.

Computerized Agents

RIT allows instructors to add computerized agents to trade in markets. These traders are grouped into four categories:

  1. Noise Traders

    Noise Traders submit limit and market orders to the market at a frequency and size that is specified by the instructor (for example, one order every five seconds with an average size of $80,000). The order type, market versus limit, and buy versus sell, is determined randomly, with equal probabilities.

  2. Liquidity Traders

    Liquidity traders are considered informed traders. A stochastic price path is generated based on two parameters specified by the instructor, the volatility and the drift. The server then draws normal deviates and generates the path based on Brownian motion. Liquidity trades are generated based on the same two parameters as noise trades, which are trade frequency and size. However, when an order has been generated, the decision of whether the order is a buy order or a sell order is based on the difference between the path price and the current market price. Buy orders will be more likely when the market price is below the path price, and sell orders will be more likely when the market price is above the path price. Other parameters allow the instructor to specify how aggressively the liquidity traders will drive the market price to the stochastic price path.

  3. Option Traders

    Computerized agents can be specified to trade options based on the Black-Scholes pricing model. Instructors must specify a constant volatility for the algorithm to calculate the current theoretical price. Buying and selling decisions of the computerized agents then work in a similar fashion to liquidity traders; they compare the market price to the Black-Scholes price which will influence the probability of whether the order is to buy or sell.

  4. Buy-Side Institutional Orders

    Institutional orders can be specified by the instructor and are routed to individual traders to be accepted or declined. These are large block orders that transact at a fixed price. Commissions are also paid to the trader for accepting institutional orders. These orders are parameterized for their frequency, the commissions paid per order, the size of the orders, and the spread paid to traders based on the current market price. Institutional orders can also be linked to the liquidity trader's stochastic stock path to determine whether institutional orders are buy or sell orders.

Other Features:

  • Real Time News Delivery

    RIT has a built-in news delivery system that can announce news based on a predetermined script (time, ticker, title, news body), or news can be input and disseminated in real-time by the instructor. News can also be programmed with specific targets so either all traders receive a news item, or only particular traders receive the news.

  • Real-Time Administrative Monitoring

    The RIT server allows the instructor to monitor, in real time, the positions of all traders that are in the RIT system. The instructor can also graph the performance (based on net liquidated value) of all traders.

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