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 (Sunday through Saturday) 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.

(TSIK RULE)You may trade only stocks listed on the KENTUCKY STOCK LIST. You can find this list at http://www.econ.org/kystock. You may not trade mutual funds.

(TSIK RULE) This KENTUCKY STOCK LIST is list of publicly-traded companies compiled based on the CJ Composite from the Courier Journal, the Herald Leader, and Hilliard Lyons Research Division. This list includes companies that are headquartered in Kentucky, companies that have state offices or subsidiaries, or companies that are of special interest to the economy of Kentucky.

(TSIK RULE) If a team "accidentally" buys a stock not on this list, they can cancel that order until 4:00 pm that day on their Pending Transaction report. If a team "accidentally" buys a stock and fails to cancel the order before it goes into their portfolio -- they must sell that stock (at a loss) before the end of the competition. KCEE can not “delete” transactions made by teams-so teams are responsible for “watching” their own portfolios. Any team that has a stock other than those on the list at the end of the competition will be disqualified to win prizes.

3. (NEW RULE!) - MAXIMUM EQUITY RULE Teams can invest no more than 30% of their total equity in any one stock. This affects both buys and short sells because both positions put their equity at risk. When placing a trade, if the requested buy or short sell is above the current 30% equity maximum, the Enter a Trade screen will give a message stating that order exceeded the maximum equity. The attempted trade, along with that message, will immediately move into the Transaction Notes report. The Maximum Equity Rule was instituted to encourage diversification in a portfolio. The SMG Program is a learning activity intended to encourage students to learn about sound investment strategies, even though the simulation is of short duration. Putting all one’s eggs in one basket is not usually sound investment practice.

4. 5 STOCK MINIMUM RULE - Teams are required to purchase (or short sell) at least 5 stocks throughout the competition. They do not have to hold all the stocks at one time, nor do they have to hold all 5 stocks at the end. Just so their portfolio reflects they held at least 5 stocks.

5. All 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. Transactions entered with a limit price will not be held past the initial attempt to price the transaction.

6. All buy orders must be a minimum of 100 shares. Sell orders for less than 100 shares will be permitted

7. 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).

8. Trades can only be processed in whole and will be rejected if sufficient buying power does not exist to execute the entire order.

9. 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 2% of $1000 or $20. On Sell or Shortsell transactions an SEC fee of $39.00 per million gross rounded to the nearest penny is also charged.

10. 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.

11. 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.

12. 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).

13. Rankings will updated every evening.

Short sell/short cover rules

14. 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.

15. 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

15. 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.

16. 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.

17. 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.

18. Participants may delete pending transactions prior to market close.

Additional rules

19. 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.



20. 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. SMG advisors will allow this be a "student competition". Advice can be given, but teams should make their own decisions, enter their own trades (whenever possible), and do their own research.

4. Teams that do not comply with the SMG Code of Participation will be removed from the portfolio rankings.

5. The authority to remove a team from the rankings lies solely with the team`s SMG coordinator organization.

6. Each team is responsible for any opening or closing transactions entered into its portfolio.

7. 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.)

8. Only transactions stored on the SMG database will be recognized for purposes of evaluating portfolio total equity.

9. 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.

10. 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.