Chicago Financial District Becomes Classroom for Professor

As a teacher, Professor Terry Grieb has always put a high priority on real-world relevance for his lectures. So when the opportunity to spend the month of June in the heart of Chicago’s financial district presented itself, it was an easy decision.

“I jumped at the chance,” said Grieb. “The ability to interact directly with major securities exchanges and the people and firms that make them run was an invaluable experience,” he said, noting the importance of giving students a perspective on how these markets operate and what they provide to our economy.

With that focus in mind, Grieb spent time on the floor of both the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME). “Seeing the big open outcry markets in action is always exhilarating,” Grieb commented, “but what really struck me was the pervasiveness of the switch to electronic trading formats.” About three quarters of the trades for these exchanges are electronic, but rather than slowing the exchanges down it has created great opportunities for growth. “The new products and markets being created directly benefit the global economy and any institution that needs to actively manage risk,” he said.

Another exciting aspect of the visit was the pending CME/CBOT merger. “The CME acquired the CBOT in early July, so I was there for the month leading up to the actual transaction. The terms of the deal and the benefits of the CME/CBOT combination versus other potential suitors was a topic of conversation on a daily basis,” said Grieb. As exchanges from around the world – including the NYSE, Nasdaq, Euronext, and the London Stock Exchange – continue to play the Mergers and Acquisitions game, Grieb feels that witnessing the CME/CBOT deal up close has allowed him to provide his students with valuable insights on how these deals are negotiated and why they are important.

“Derivatives trading and the link between those derivatives and their underlying securities is a primary issue in modern financial markets,” Grieb commented. “The combined CME Group is now the world’s largest exchange for trading futures and options. The implications for the pricing of securities worldwide and the potential for risk management are astounding.” Grieb uses his experience to help students better understand the interrelated nature of global financial markets, and to see individual securities and trading mechanisms as part of the bigger picture.

The timing of his visit also allowed Grieb to spend time at the Chicago Climate Exchange (CCX) and attend their Annual Members Meeting. The CCX is North America’s only legally binding carbon emissions allowance trading system, and the University of Idaho has been a member of the CCX since last April. Membership in the CCX represents a legally binding commitment to reduce greenhouse gas emissions, and provides access to a market where carbon credits can be traded. The membership is geared toward reducing and eliminating greenhouse gases; the market component helps provide an economic incentive and a flow of capital to carbon reduction and carbon offset projects. “Our membership in the CCX is a big part of the UI’s commitment to sustainability, and I was honored to be able to represent us at that meeting.” Grieb said, “I look forward to developing new ideas and research projects consistent with the missions of the CCX and the UI’s sustainability initiative.”

The experience also provided important information for the development of the Barker-Dangerfield Wealth Management Fund, as Grieb visited a number of trading and clearing firms, including Trade Link, Darwin Capital, Rice Dairies, thinkorswim, and Advantage Futures. “It was a tremendous opportunity to spend time with the people who make these markets work, and to learn about their business models and how they do their jobs,” Grieb reported. He was able to learn about trading and risk management strategies from professional traders, and also had a chance to observe the operational structures of the firms where they worked.

Grieb thinks that bringing this information back to the Barker Program is the next step. The growth of the program has been strong, and there are now approximately 50 students involved with one of the different groups. “Right now we are building the foundation of the Barker Program. I would like to see us operate as much like a real asset management firm as possible.” That means having students trading a diversified suite of financial products, risk management and audit functions, contracting for the trade clearing function, cash management, and compliance. “It is consistent with the integration theme here in the College of Business and Economics,” Grieb said, and he commented that building all facets of business into the program will allow participation by a broad range of students with different academic and professional interests.

The focus of the Barker Program may be on asset and risk management, but Grieb sees the possibilities reaching well beyond that. “Students in our program have an advantage in competing for securities trading positions, but we can also provide students direct experience in other areas. This program has the potential to give them an advantage in competing for jobs in accounting, regulatory compliance, and marketing, to name a few,” he said.

Grieb was especially grateful for the support provided by University of Idaho alumnus Rotchy Barker. “Mr. Barker was instrumental in making this happen, and I would like to offer my sincere thanks for all of his efforts to help make this experience a reality,” said Grieb.

Back in Moscow, Grieb hopes to use this experience to benefit students in as many ways as possible, from the classroom to expanded professional training to improved job opportunities. “I have always loved visiting Chicago,” he said, “and I can’t wait to go back and continue to build on the connections I made last summer.”