A SECURITIES DEALER SIMULATOR New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 322 A SECURITIES DEALER SIMULATOR Geoffrey Churchill Department of Quantitative Methods Georgia State University INTRODUCTION Business games have traditionally exploited the firm’s interface with product markets; in fact many of the pioneering games [2, 3] were explicitly or de facto marketing games. More recently some interest has shifted to financial markets, and we have seen the development both of investment games {5} and of general or special purpose games which incorporate some aspects of financial markets [1,4]. In using games which generate stock prices for the competing firms, the author has observed considerable player interest in stock price comparisons (sometimes beyond that which could be justified by the quality of the stock price model) and even the occasional development of an informal market. Invariably, though, the rigors of bookkeeping would cause the collapse of this market before the end of the term. Given the assumption that student interest is a resource generally worth exploiting, a preliminary attempt was made at computerizing the bookkeeping for such a market. Eventually a program set evolved which has proven satisfactory in use. Experience with the simulator has generated some interesting research questions which have not up to now been tackled due to the small student volume accessible to the course in which it has been used. Some of these are: 1. What correspondence exists between success in game management and success in portfolio management? 2. Does the opportunity to invest alter decision-making behavior in the game? 3. What personality characteristics or group interactions affect the propensity to invest in one’s own firm? The Simulator As in most games, no attempt is made to duplicate the real world in full detail. Accordingly all transactions take place on the fictional Nuevo Munich Securities Exchange under the rules outlined in the student handout presented below as Figure I. The brokerage firm employed is A.E. Newman & Son. The cycle of play is as follows: 1. Students learn initial financial conditions of firms. 2. Referee calls program MARKET, initializes system. 3. Referee calls program INVEST, generates reports showing each player his cash stake (Figure IIa). 4. Players prepare TRANSACTION ORDERS (Figure III). 5. Referee calls program INVEST, inputs player transactions, generates reports (Figure ITh). 6. Game is played one quarter. 7. Referee calls program MARKET, updates financial market information. New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 323 8. Referee calls program INVEST, generates a report on the status of each player’s portfolio (Figure II c). 9. Return to step 4. This cycle then continues to the end of play. 10. Optionally, at the end of play, the referee may call program INVEST and close out all portfolios, thus permitting a final dollar comparison of results. FIGURE 1 NUEVO MUNICH SECURITIES EXCHANGE------------------------------------------------------------------- SUMMARY OF CONDITIONS OF TRADE I. Insider trading is forbidden. An officer of a firm may not engage in short sales of his company’s stock, nor may he/she sell stock in his company held for less than one year (except under conditions outlined in VI, below). II. Commissions shall be charged as follows: Common stock purchase or sale (over $25/share) 1.25% Common stock purchase or sale (under $25/share) 1.50% Bond purchases $5/bond Commercial paper 5% of interest earned III. Neither commercial paper nor short positions may be acquired on margin. IV. When a short sale is executed, the client must cover the short position by depositing with the broker an amount equivalent to 150% of the gross proceeds of the sale. This deposit account will be adjusted quarterly to maintain parity with the most recent closing price of the stock. V. Income taxes will be withheld and paid quarterly at a rate of 50% on ordinary income and 25% on capital gains. All earnings are ordinary income except gains/losses on securities held for 6 months or longer. There is no provision for carry forward or carryback of losses. VI. A broker may call any or all margin accounts at any time, liquidating any or all posit ions for that purpose. No more than 50% more than the current short-term rate may be charged on margin accounts. New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 324 New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 325 New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 326 New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 327 Portability At the time of this writing, the simulator is specialized to the ØPSTAC game, and application to other games will undoubtedly require some adaptation. Nevertheless, the relevant features of this game probably encompass the financial aspects of most general purpose games, so that adaptation is likely to involve more deletion than addition of features. These features include common stock which may yield cash and/or stock dividends, stock splits, new issues of common stock, a single series of bonds issued by each firm, and a commercial paper market. The time interval of play is a quarter, and players normally run the firms six to twelve quarters in an academic term. The current implementation of the simulator is in BASIC on a 48 k IBM 5100 with printer and auxiliary tape drive. A feature of this system of which advantage has been taken is separate direction of output to both CRT screen and printer; these aspects of the programs would need adaptation for implementation on other systems. This is for convenience only, however, and an earlier version ran without difficulty on a conventional time sharing system. Summary A securities dealer simulator has been developed which shows interesting possibilities both for course development and as a research tool. A potential user would almost surely have to adapt the system to his needs, but adaptation would be far less difficult than independent development. Listings are available on request from the author, as are IBM 5100 tapes on an exchange basis REFERENCES 1. Churchill, Geoffrey, Sandra F. Beldt, John Y. Coffman, et al, ØPSTAC: Operational Planning, Strategy, and Tactics: A Decision Oriented Management Game, (Atlanta: Georgia State University, fifth revision, 1974). 2. Day, Ralph L., Marketing in Action - A Decision Game, (Homewood, Ill.: Irwin, Revised, 1968). 3. Jackson, James R., UCLA Executive Decision Game No. 2, (Los Angeles: Graduate School of Business, U.C.L.A., undated). 4. Nichols, Arthur C. and Brian Schott, SIMQ - A Business Simulation Came for Decision Science Students (Dubuque: Kendall/Hunt, third edition, 1975). 5. Nielsen, Carl C., The Investment Game: Selection and Management, (Belmont, Calif.: Wadsworth, 1974). Table of Contents Volume 4, 1977 Double Play for Gaming Effectiveness Adaptive Rule Changes in Computer Simulation Gaming Œ A Means of Pedagogical Reactive Interchange Monte Carlo Simulation in Personnel Management Training Teaching About the Implementation of Job Redesign Using Simulation and Group Discussions An Interactive Simulation of Private Sector Collective Bargaining Leadership Evaluation and training through Behavioral Simulations: Method, Results and Future An assessment of the Effect of Experiential, Simulation and Discussion Pedagologies Used in Laboratory Sections of an Introductory Management Course An Experiential Understanding of the Trust Dimension Using Consulting Cases to teach Business Policy An Experimental Testing of Teaching Methodologies in Marketing Interpersonal Skill Development: The Experiential Training Unit (ETU) and Transfer of Training An Analysis of the Relationship between Personality characteristics and Preferred Styles of Learning Analysis of Effective Communication Skill Development in Graduate Business and Engineering Experiential Education Changing Perceptions of Learning in a Simulated Environment Student Perceptions: Simulation and the Corporate Policy Course Degree of Uniformity in Achievement Motivation Levels of Team Member: Its Effect on Team Performance in a Simulation Game Channel Conflict, Cooperation and Control: an Experiential Learning Exercise Differences in Experiential and Non-Experiential Learners' Reactions to Conflict between Individual and Organizations Behavior The Evolution and Evaluation of a Required, Senior-Level Course in Experiential Business Applications Building Management Skills through Problem Solving A Live-Case Approach to the Business and Society Course Experiential Learning: Toward the Development of a Theoretical Base and the Identification of Variables and the Hypotheses to Guide Research The Role of the Administrator in Experiential Learning and Simulations Some Thoughts on a Theory of the Use of Games and Experiential Exercises Three Applications of the Management of Learning Grid An Analysis of ABSEL: Its Past Achievements and Future Prospects New Horizons in Simulation Research Prediction of Academic Achievement in a Simulation Mode via Personality Constructs Sex Differences in a Bargaining Simulation COM-GAME: A Commodity Trading Game for Use in an Introductory Business Statistics Course A Financial Institution Management Game with Direct Participant Interactions A Non-Computerized Marketing Planning and Strategy Game Delphi in the Classroom: A Demonstration of Forecasting Economic Activity The Potential of Programmable Calculators for Processing Small Business Simulations Can a Small Predominantly Clack University Incorporate the Computer Simulation Gaming Teaching Methodology into it Curriculum Measuring the Effect of an Experiential Exercise Experiential Learning - Analysis of a Partial Success Predicting Participants' Performance and Reactions in an Experiential Learning Setting: An Empirical Investigation A Simplified, Non-Computerized Marketing Channels Game Manufacturers and Retailers: A Negotiation Game for Beginning Management Students Petroleum Management Game A Securities Dealer Simulator SIM ECO SOC with Business Curriculum Modules: A Simulation for Business Ethics and Morals The Picnic: A Perceptual Errors Exercise Salt III; an Experiential Exercise to Highlight the Interpersonal Dynamics Involved in the Negotiation Process Experiential Exercise on Values, Attitudes and Conflict Resolution in Organizational Behavior Kick'N Go: A Product Management and Social Responsibility Dilemma The Use of Self-Assessment Work-shops in a school of Business Administration The Dilemma of Self-Perception