Directly from the rules on stockmarketgame.org
Review for yourselves and for SMG Quiz #6 in March
Each team begins the simulation with $100,000 in cash and may borrow additional funds. How much you may borrow is dependent on the equity in your account. Teams that buy on margin must maintain the Minimum Maintenance requirement. If you dip below this level, you will receive a margin call and must sell off enough investments to meet Minimum Maintenance. If a team still has not met its Minimum Maintenance requirement within seven days, the SMG system will automatically liquidate enough of the portfolio's investments to collect the required amount.
You can only borrow half of what you’re worth (initially about $50,000 of your $100,000 starting amount). We call this buying on Margin. If your investments do poorly, your Margin loan will grow to more than half forcing a Margin Call that you have 5 business days to resolve by selling off some stock. You’ll likely get a message from the SMG system. If you don’t comply, they’ll sell random things for you. Suggest you never even approach the 50% number to avoid the problem.
Interest is charged weekly on negative cash balances at an annual rate of 7%, and credited weekly on positive cash balances at an annual rate of 0.75%. Interest is calculated daily, then summed for the week (Saturday - Friday) and posted Saturday (with Friday's date). The daily rate is based on a 365-day year. Daily Interest = Cash x Appropriate Interest Rate (as a decimal) / 365. Bond coupon payments will be posted when due. Bond buyers will also be charged for accrued interest since the last coupon payment. Bond sellers will receive accrued interest since the last coupon payment.
All interest payments and costs tend to be posted on Friday, and usually appear in your account sometime between Saturday morning and Monday morning. Margin Loan interest is 7% annually but you get charged weekly and weekly it’s only 0.135%. Tiny. Your cash balance is in a savings account that pays 0.75% annually. Weekly, that’s so tiny as to be inconsequential. Like less than .015%. So unwise to keep too much in cash. Bond buyers should buy their bonds shortly (perhaps 2 days) before the next payment date and sold in the same timely fashion after the next payment date. And unless the stock market is in freefall, minimize your investment in bonds. They’re generally for long term investors and tend to act opposite of the stock market in general even then.
Teams may trade only stocks and mutual funds listed on the NASDAQ Stock Market and the New York Stock Exchange. Teams cannot trade over-the-counter or "pink sheet" stocks since they often price incorrectly. In addition, extremely volatile stocks or stocks that trade infrequently are not permitted and may be liquidated to protect portfolio stability. SMG reserves the right to cancel transactions in these securities as deemed necessary.
Stocks can only be traded when they’re listed on NASDAQ or the NYSE, period. And the game reserves the right to cancel transactions on stocks that trade infrequently, priced wrong, and sometimes are listed as OTC. They’ll also cancel trades in stocks that are overly volatile like that Gamestop mess from a year ago.
Some regions may also trade a pre-determined group of municipal, corporate, and Treasury bonds. Only bonds provided by SMG may be traded. These bonds will be investment grade, with S&P ratings of "BBB" or higher. Teams cannot trade unrated bonds or those with lower than "BBB" ratings, also known as high-yield or "junk" bonds, as they often carry higher default risk.
You won’t be able to buy bonds rated lower than BBB. Probably unwise in the game to buy stocks lower than A without consulting me privately.
A record of a team's portfolio and transactions will be available daily. A team will not receive a portfolio nor be listed in regional rankings until its initial transaction is entered successfully. A student can only be assigned to ONE portfolio per game period.
Your team can’t appear in the rankings until AFTER it starts making transactions so make at least some small $ ones quickly.
Teams do not have to liquidate their portfolios at the end of the game. Winners will be determined based on Total Equity
Don’t sell off your investments late in the game. Our specific version of the game bases your rankings on the total value of your investments, cash on hand, minus borrowed investments at the end of the game. Generally unwise to sell that last week unless you have serious reasons to believe a crash is imminent. Suggest you discuss with me.
The minimum market capitalization for stocks in SMG is $25 million, and SMG does not permit buying stocks or mutual funds or short selling stocks that trade below $3 per share the day before and the day of execution. These low-priced stocks, also known as "penny" stocks, are risky and volatile investments. Sell transactions on long positions and short cover transactions on short positions will be accepted, even if the price is less than $3 per share.
You can’t buy stocks in small companies (a market capitalization below $25M. You can’t buy penny stocks defined as stocks trading at less than $3 for any point on the day of the trade or the day before the trade. You can sell such stocks at any time (say a $3.50 stock drops below $3 and you want to get rid of it. I’d advise you to stick with stocks in the $10 and higher range.
All stock and mutual fund buy orders and stock short sell orders must be for a minimum of 10 shares. Sell orders on existing inventory and short cover orders for less than 10 shares will be permitted. Municipal and corporate bonds can only be traded in $1,000 increments, and Treasury bonds can only be traded in $100 increments. Bonds and mutual funds cannot be sold short.
You cannot buy or short sell less than 10 shares of an individual stock or mutual fund. You can sell or short cover any amount that you have in your portfolio already. Municipal/Corporate bonds are traded in $1000 increments. Treasury (federal) bonds are traded in $100 increments.
Stock transactions in Real-Time games are executed at market price at the time of entry, while bond and mutual fund transactions are treated as End-of-Day transactions and are executed at that day's closing price. End-of-Day game transactions are priced at market daily closing prices for all asset types. Participants of End-of Day games may delete pending transactions prior to market close.
Stock transactions are priced at the time you enter the trade (with team’s password). Bond and Mutual Fund transactions are priced as of the end of the trading day’s closing price.
You should use the Limit feature on Mutual Funds to plan in advance the most you’re willing to pay or the least you’re willing to sell such shares for since there is typically a few hours between when you enter such trades and when the closing price is set at the end of the trading day.
SMG is run Monday - Friday with hours of operation from 9:30AM ET - 4PM ET. Teams may trade on any day the participating stock markets are open. Orders may be entered seven days a week during hours the system is available. Stock trades entered after close of market (4PM ET) or on weekends and market holidays will be priced at the next business day's opening price for Real-Time games and at the next business day's closing price for End-of-Day games. Bonds and mutual funds will be priced at the next business day's closing price for both Real-Time and End-of-Day games.
Trades made M-F between 9:30am and 4pm when stock markets are active (closed on a few national holidays or emergencies) follow the rules listed above. Trades made outside of these hours (at night, weekends, etc.) typically execute at 9:30am of the next trading day and then show up in your portfolio the following day from then. So if you make a trade at 7pm on a Monday, it will go in as of 9:30am on Tuesday and not show up til Wednesday.
Transactions entered with a limit price will not be held past the initial attempt to price the transaction during market hours. This applies to both Real-Time and End-of-Day games.
Just a reminder that if you set a limit on a Mutual Fund purchase, it’s based on the closing price and if the transaction crosses the limit, it gets canceled right then and there. Use limits only for Mutual Fund transactions and only if you seriously care about the final price of the trade.
Trades can only be processed in whole. There are no partial fills.
If you make a trade that costs more than you have or can borrow or sell for an amount of shares beyond what you own, the entire transaction will get voided.
A $5 per-trade commission fee is charged on all transactions. An SEC fee is also charged on all sell transactions.
Every transaction will cost you a minimum of $5. And there might be a tiny fee called an SEC fee on all sell transactions. The last amount I saw was $5.10 per $10M in sales so we’re likely talking pennies at most.
Short positions held in stocks are marked to the market daily and the resulting gain or loss is added or subtracted from Cash Balance. No mark-to-market transactions are posted in Transaction History. (Please note: there is no short-selling allowed in non-margin cash accounts.)
Not on quiz
No back posting of trades will be done for trades of securities not contained within the SMG Security Table. Once the missing security has been added, the security can be traded. The same rule applies to trades rejected if they are incorrectly pricing below $3. Once the pricing has been corrected, the security can be traded. There is no post-dating of trades due to the system being unavailable.
Until a security is properly listed in the SMG database, you can’t buy it. Mostly this occurs on the day of an IPO. You can’t buy a stock on the day of its IPO in the game, only the next day USUALLY.
Stock and cash dividends and stock splits are automatically computed into portfolios. Every effort is made to simulate as closely to real life as possible a variety of other corporate actions (mergers, acquisitions, spinoffs, etc.), which may include the standard three-day settlement period. In this case, it may be necessary to suspend trading of a given security until the action can be completed. Canadian stocks trading on US exchanges cannot be traded between a split's record date and its payout date. It is the responsibility of teams to check their portfolios for accuracy and notify their Coordinator by email of any problems that are encountered.
If there’s a stock split or an acquisition where the stock of one company is bought by another company and now you own stock in this new company, or a merger between companies creating a new company altogether, you should actually know about it BEFORE it happens or you’re not keeping track of the stocks in your portfolio or the stocks of interest in your Team Journal. But when it happens, it usually takes about 3 business days for it to get sorted out in the SMG system. Unsure about the Canadian mention so ignore it.
Any violation of the rules of the SMG may result in the invalidation of a transaction. Repeated violation of the rules may result in the disqualification of a team.
If you violate a transaction rule, the transaction will of course get canceled which may or may not have the subsequent effect of canceling other transactions. For example, if you sell something and that gets canceled, And you attempt to buy something else with the money you now didn’t get, that buy transaction will get canceled. Usually best to leave a trading day between such moves where one is dependent on another executing successfully. If you make too many canceled transactions, your team can be disqualified but I’ve never seen that happen before, not for that reason.
Teams are responsible for maintaining the secrecy of their password and the integrity of their portfolio. Each team is responsible for any opening or closing transactions entered in its portfolio. Teams may not enter transactions in portfolios other than their own. (When a team asserts that a transaction was entered by a non-member, the team will still be ranked based on their portfolio, which will include the challenged transaction.)
If your password is compromised, transactions made with the stolen password go through and we can’t fix that other than more trades wasting more commission money. Change your team’s password ASAP or i nvolve me ASAP.
Portfolios must make at least five transactions by the end of the game session in order to qualify for the portfolio competition.
Shouldn’t be a problem but make sure you don’t get disqualified for not making at least 5 transactions.
Teams may not invest more than 20% of their total equity in any one company or fund as a result of the maximum equity rule. If a stock or fund in a team portfolio increases in value and places the investment beyond 20% of their total equity, they will be unable to purchase additional shares of that stock or fund.
You cannot have more than 20% of your team’s total equity in any one investment. (used to be 33%). So $20K at the game’s start. Transactions that violate this rule can be cancelled BUT if the system doesn’t notice, your team can be tossed out of the game when the problem is discovered. For example, if your team wins, they’ll likely go over all the transactions more carefully by hand to double check. So monitor this carefully and if you find yourself in violation because your equity is dropping, sell some off so if they do catch it and see you reacted swiftly, they’ll consider overlooking it.
This is a real-time game. All transactions placed during market hours will receive real-time pricing and process immediately. This can be confirmed via the "transaction notes" page within the trade tab. However, these transactions will reflect onto the portfolio by end of day.
Remember the real time stuff doesn’t apply to Mutual Funds. However you should eventually see things in the Transactions Notes page in the trade tab and should certainly see completed transactions by the next trading day or at least the day afterwards.
Usually a good idea to make a page in your Team Journal to record all transactions just so you can keep track of technical glitches. Most glitches resolve themselves within 24-72 hours. Every transaction gets a unique code number. Not a bad idea to copy and paste that number along with the transaction. While SMG rarely if ever makes mistakes they don’t ultimately fix by themselves, if you aren’t recording the transactions elsewhere, you won’t even know there’s a problem.