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Rules of the Stock Market Game
1. Rules of The Stock Market Game Program
2. Short sell/short cover rules
3. Portfolios
4. Additional rules
5. Code of participation
Rules of The Stock Market Game Program
1. Each team begins the simulation with $100,000 in cash and may borrow additional funds. How much you may borrow is dependent upon the equity in your account. Interest is charged weekly on negative cash balances at an annual rate of 7.00%, and credited weekly on positive cash balances at an annual rate of 5.00%. Interest is calculated daily, then summed for the week (Saturday through Friday) and posted on the following Tuesday. The daily rate is based upon a 365 day year. Daily Interest = Cash * Appropriate Interest Rate(as a decimal) / 365.
2. You may trade only stocks and mutual funds listed on the American Stock Exchange, Nasdaq Stock Market and the New York Stock Exchange that have traded within the last 7 days. Canadian stock traded on these exchanges will be priced within these markets but the current value is calculated using Canadian exchange prices adjusted using the current exchange rate for the American dollar equivalent.
3. End of Day Game transactions are priced at market daily closing prices. These prices can be found in the next day's newspaper or by using the price quote facilities of SMG . Real Time Game transactions are priced at the market price at the time of entry.
All Mutual Fund transactions are treated as real time transactions and priced at the previous day's closing price. This applies to both End of Day and Real Time games.
Transactions entered with a limit price will not be held past the initial attempt to price the transaction. This applies to both the End of Day or Real Time Games.
4. All buy orders must be a minimum of 100 shares. Sell orders for less than 100 shares will be permitted.
5. SMG does not permit buying stocks or mutual funds that trade below $5 per share. Such orders will be rejected. Sell transactions for existing long positions where transactions are executed at closing or real time prices will be accepted, even if the price is less than $5.00 per share. (There are a number of reasons for this rule. Low priced stocks, known as penny stocks, are very risky and volatile investments. Accordingly, brokers will not permit their customers to trade such securities on margin, just as SMG does not. Also, penny stocks tend to have very shallow markets and their prices move sharply with large orders, unlike SMG where transactions are executed at closing or real time prices regardless of order size).
6. Trades can only be processed in whole and will be rejected if sufficient buying power does not exist to execute the entire order.
7. A 2% broker's fee is charged for all transactions. For example, if you buy 100 shares of a stock at $10 per share, you must pay the 2% of $1000 or $20. On Sell or Shortsell transactions an SEC fee of $15.30 per million gross rounded to the nearest penny is also charged.
8. The Game is run Monday through Friday. Teams may trade on any day the participating stock markets are open. Orders may be entered 7 days a week 24 hours a day.
9. Trades entered after close of market (4:00 PM ET) will be priced at next day's closing price for the End of Day Game and at opening price for the Real Time Game. Mutual Funds are always treated as real time trades but priced at the last closing price.
10. Teams do not have to liquidate their portfolios at the end of The Game. Winners will be determined on the basis of either equity or the % return above/below S&P 500 Growth. (Some states may use additional criteria to determine winners).
Short sell/short cover rules
11. All short sell orders must be for a minimum of 100 shares. Short cover orders for less than 100 shares will be permitted. Open ended mutual funds can not be short sold.
12. SMG does not permit short sells on stocks or mutual funds that trade below $5.00 per share. Such orders will be rejected. Short cover transactions for existing short positions will be accepted, even if the price is less than $5.00 per share. (See Rule #5 for an explanation).
Portfolios
13. 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.
14. 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 to the Security Table the security can then be traded. The same rule applies to trades rejected if they are incorrectly pricing below $5. Once the pricing has been corrected the security can be traded.
15. Stock and cash dividends and stock splits are automatically computed into your portfolio. However, you are required to check them for accuracy. Promptly notify your Coordinator at their e-mail address of any problems you encounter. Canadian stocks trading on US exchanges cannot be traded between a split's record date and payout date.
16. Participants of the end of day pricing game may delete pending transactions prior to market close except in the case of Mutual Funds which are processed as real time orders.
Additional rules
17. 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.
18. Additional rules have been developed in some states and, if applicable, have been included in your Coordinator's Information Page. It is the responsibility of your team to learn and abide by all rules.
19. You must maintain a total equity position that is greater than or equal to 30% of the current value of your current holdings. If you don't you will receive a margin call.
Code of participation
1. SMG advisors must be responsible adults 18 years of age or older. In no case may they be a matriculated student in grades K-12.
2. SMG advisors will ensure that every participant on their team(s) has read and understands the SMG Rules and the Code of Participation.
3. Teams that do not comply with the SMG Code of Participation will be removed from the portfolio rankings.
4. The authority to remove a team from the rankings lies solely with the team's SMG coordinator organization.
5. Each team is responsible for any opening or closing transactions entered into its portfolio.
6. Teams may not enter transactions into portfolios other than their own. (Please note that when a team asserts that a transaction was entered by a non-member of that team, the team will nevertheless be ranked based on their portfolio's total equity, which will include the challenged transaction.)
7. Only transactions stored on the SMG database will be recognized for purposes of evaluating portfolio total equity.
8. FIE will be responsible for the accuracy of the market data. If a team believes a stock price or other information is in error, it shall notify its SMG coordinator organization.
9 . In the event of an error on the part of FIE and/or coordinator organization(s), their liability to a participant shall be limited to the refund of registration or other fees paid.
Copyright © 2003 Foundation for Investor Education.
All rights reserved. Provided for educational purposes without warranty expressed or implied.
Your Local Rules for the Stock Market Game
1. The Illinois MINIMUM STOCKS Rule:
To be eligible for awards, teams must trade a minimum of four (4) different stocks during their trading session. These stocks may be liquidated any time the team`s research shows that stock is no longer of benefit to their portfolio. These stocks do not have to be held through the end of the session for which the team is registered (see SMG Rule #10.)
If a team is otherwise eligible for an award in their regional competition, and they did not trade a minimum of four different stocks, they will be disqualified from recognition.
The word ``Trade`` is defined in this context as either buying stock, or short selling stock. The term ``Liquidated`` means to sell stocks that were bought (a long position,) or short cover stocks that were initially short sold (a short position.) There is no restriction on trading of mutual funds.
Teachers wanting to incorporate a lesson on portfolio diversification (spreading out risk) should see the following lesson located in the Learning Resource Center of the Teacher Support Center : ``Stocks in a Box``, from the curriculum Beyond the Market and Into the Classroom
The SMG portfolio system does not monitor this 4-stock requirement (no error message is sent the team.) Teams and their teachers must make sure this requirement is met, if they want to be eligible for awards.
2. The Illinois MAXIMUM EQUITY Rule :
Teams of students in grades 4-12, and Teacher Teams, may invest no more than 30% of their total equity in any one company. If a stock in which teams have invested becomes more than 30% of the total equity, teams will be able to maintain that position but will be unable to purchase additional shares of that company. Post-Secondary teams have 100% maximum equity.
Teachers wanting to utilize an info sheet on calculating the Maximum Equity should go to Maximum Equity Rule . Download the reference, save to a file and print. Adobe Acrobat is required to view the file.
The SMG portfolio system does monitor this rule, and will not allow teams to go beyond the 30% maximum equity.
Copyright © 2003 Foundation for Investor Education.
All rights reserved. Provided for educational purposes without warranty expressed or implied.