The Financial Trading System (FTS) brings the excitement of a trading floor to the classroom. It exploits advances in technology to integrate classroom instruction with real-time market participation, to create a unique environment for financial education.

The system can be used in-class to complement lectures. The trading cases can also be assigned as a separate group activity that can be run in tutorial sessions.

The system runs on a Windows NT network of personal computers. The network of computers forms a financial market. A variety of financial instruments can be traded in the market, including stocks, bonds, options, futures, and more complex securities such as caps, floors, and swaps.

In broad terms, the system operates in the following manner.

A trading environment contains two essential ingredients. The first is a description of the set of securities to be traded and of the factors which affect the payoffs to these securities. The second is information about the traders, such as the initial endowments of the traders, their investment or trading objectives, and the information to be given to them. In addition, the person creating the trading environment must specify other variables such as the length of a trading period. A formal description of a trading environment is given in the Appendix.

Each instance of a trading environment is called a trial. Typically, you will run an environment repeatedly over several trials. A particular trading environment (or trial) may itself consist of several trading periods.

Once a trading environment, or "case," has been completely specified, it is stored in several data files which are used by the software. These files are referred to by a filename and a file type. For every trading environment, the filenames are predetermined. Only the file types can vary, and different trading environments have extensions that indicate their file type. For example, one of the cases which accompany the software has the extension b01. Since a file type can consist of up to three characters, an extremely large number of cases can be developed.

One computer on the network is called the FTS Market. The data files which describe the trading environment are inputs to FTS Market. The FTS Market initializes the system, synchronizes the market, and collects data generated by the market. It is usually run by the instructor. The other computers are occupied by traders in the market, and are called the "trader" computers. Those occupying the FTS Traders can make market in and accept outstanding bids and asks for the financial assets in the trading environment. The software performs all the book keeping and networking tasks required.

The FTS Market and FTS Traders run under Windows NT. After you have installed the system, run the FTS Market simply by double-clicking its icon. On any subset of FTS Traders, double click the FTS Trader icon to run the trader programs. The FTS Market will ask you various questions. The only one you really have to answer is the one asking for the trading case. You can simply click "OK" for everything else to accept the default value.