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June 20, 2011

5 min read

In the Future IBs and Financial Advisors Compete Head to Head

By Mark Melin | Author High Performance Managed Futures and division director at PFGBest. The growth in managed futures points to increased competition coming from the traditional Wall Street financial advisor. The question is: how can IBs manage this threat? The biggest weakness many financial advisors have when discussing managed futures is their lack of understanding the asset class. There are five key points advisors must understand in order to carry on an intelligent managed futures conversation, some of which was outlined when Northwestern University had its four hour educational course on the topic this March 19. IBs must understand these key points and communicate them properly. When facing challenges from the equity world it is important IBs employ the right tactics. The IB that succeeds against financial advisors may have these characteristics in common: 1. Understanding of Trading Strategies: Most financial advisors don’t understand the critical difference in strategies...

How will the Proposed Swaps Regulations Affect IBs?

Regulation of the OTC derivatives markets was a hallmark of the Dodd-Frank Act. While the swaps regulations will take time to implement, and may not necessarily impact Introducing Brokers in a direct manner, IBs should nonetheless pay attention to the swaps regulation drama for a couple of reasons. First, the CFTC’s focus on swaps means that their attention is not on other proposals, like Proposed Regulation 1.71. Secondly, as the swaps regulations begin to take form, there will be time and opportunity for IBs to modify their business models to capitalize on the new systems. Proposed Regulation 1.71 Proposed Regulation 1.71 has quickly taken a backseat to the swaps regulations. In broad terms the proposal would require FCMs and IBs to implement certain “Chinese Wall”-like procedures to ensure there are no conflicts of interest with respect to research and execution. While such a concept may work in the context of...

6 Reasons to Embrace Inbound Marketing

by Phil Donaldson and Candyce Edelen | PropelGrowth Phil Donaldson Email: pdonaldson@propelgrowth.com Twitter: @PhilDonaldsonNJ Phone: 212.812.3998 Candyce Edelen Email: cedelen@propelgrowth.com Twitter: @CandyceEdelen Phone: 212.738.9445, ext. 501 In today’s digital age, consumers and business people are looking to the Internet to find information to guide nearly every important decision they make. At the same time, their degree of patience for and trust in traditional advertising is plummeting. The statistics aren’t pretty. We found conflicting information about just how how bad it is, but suffice it to say, people generally don’t trust advertising. In his book “Marketing to the Social Web,” Larry Weber found that only 14% of people trust advertisements. The Alterian report “Your Brand: At Risk or Ready for Growth?,” found that only 5% surveyed trusted advertising and that a mere 8% trust what companies say about themselves. HubSpot recently published research findings that showed the ROI for traditional advertising...

Anticipating the USDA Acreage Report The 2011 Outlook for Corn, Soybeans and Wheat

When: Tuesday, June 28, 2011 at 2:00 p.m. CT Where: CME Group Visitor's Center Auditorium 141 W. Jackson, 5th floor Chicago, IL 60604 The current conditions in agricultural commodities have created much volatility in the grain markets. In anticipation of the June 30 USDA 2011 Acreage report, please join us in a discussion of the summer's grain prospects and the impact of the recent weather crises. The discussion will also include a trader's perspective on the new Weekly Grain Options, which provide opportunities to trade high impact events?such as USDA reports and weather conditions. Since their launch on May 23, Weekly Corn, Soybean and Wheat options have traded more than 40,000 contracts, including a record 7,080 the day before the June 9 USDA Crop Production report. Topics include: Perspectives on acreage Current weather trends 2011 yield potential and price outlook Capitalizing on opportunities with Weekly Grain Options Speakers: Tom Shuff...

Compliance Workshop for Forex IBs, CTAs and CPOs

Tuesday, June 28, 2011 NYMEX World Headquarters, New York City NFA will conduct a compliance workshop in New York on Tuesday, June 28 at the NYMEX building in New York. The workshop will focus on areas in which NFA Compliance staff has frequently found regulatory deficiencies, including registration issues, disclosure documents, recordkeeping, promotional material and anti-money laundering programs for IBs. For more information regarding details and registration, click here.

Learning to Make Trading Decisions with Imperfect Information

“A man with a watch knows what time it is. A man with two watches is never sure.” that’s Segal’s Law. Successful trading comes from being able to make decisions with imperfect information. However, like the man with two watches, we often try to look for multiple indicators to confirm our decision before we make a trade. After all, we want as much going for us as possible. Yet, waiting for everything to be aligned in order to make a trade, means that you will most often be either wrong or late. By the time everybody agrees on anything, it is either wrong or it has already happened. As an example, let’s say we put 100 people in a field on a hot summer day with the sun beating down on them and not a cloud in the sky. Then, let’s ask all 100 people, if it is going to...

In the Future IBs and Financial Advisors Compete Head to Head

In the Future IBs and Financial Advisors Compete Head to Head By Mark Melin | Author High Performance Managed Futures and division director at PFGBest. In my last article, I mentioned that managed futures could grow to a $3 trillion industry rather quickly. This is an admittedly optimistic projection, but then I’ve been witnessing some very interesting developments that make this projection seem more plausible – and most of this is coming from the equity world. There are several well-known financial advisor-based firms that are preparing to descend on the managed futures industry with a force our industry has never seen. Essentially, these household names have figured it out. Managed futures is uncorrelated to the stock market at the performance driver level. Their investor client’s don’t need to understand this, but now that the equity world gets it they can start marketing investment portfolios not entirely tied to the performance...

Performance Reporting Back on the Front Burner for CTAs and CPOs

Earlier this year, the CFTC proposed the following amendments to certain Sections of Part 4 of the Regulations which affect the registration and reporting requirements of CTAs and CPOs, including: Requiring a new data collection system for CPOs and CTAs, including monthly and quarterly performance information for each commodity pool managed by a CPO. Rescinding the exemptions from registration of CPOs and CTAs. Increasing the threshold for qualification as a QEP. Requiring annual audited financial statements for previously exempted pools operating under Regulation §4.7. Require the annual filing of notices claiming exemptive relief. New risk disclosure requirements for CPOs and CTAs. The rescinding of the exemptions for registration may result in the newly registered CPOs and CTAs to comply with the performance reporting rules under Regulations §4.25 and §4.35. As a result of the proposed new registration and as a refresher for existing CTAs and CPOs, the following is a...

An Examination of CFTC Rule 1.71

The Commodity Futures Trading Commission (CFTC) has proposed rule 1.71 that establishes conflicts of interest requirements for futures commission merchants (FCMs) and introducing brokers (IBs). The proposed rule is meant to deter non-research employees such as sales and trading personnel from influencing the content of research reports prepared by research analysts employed at the same company or an affiliate. The CFTC had a comment period which closed January 18th. There is no timeline for when a final rule may be published. The proposed rule was brought on by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which directs FCMs and IBs to implement informational partitions between those researching or analyzing prices or markets for commodities and those involved in trading or clearing activities. Specifically, the rule in pertinent part requires: Persons researching or analyzing the price or market for any commodity are separated by...

Five Quick Social Media Tips for IBs and CTAs

Last week, Phil and I spoke at the National Introducing Brokers Association (NIBA) New York conference. We discussed the topic of lead generation and how IBs (introducing brokers) can use social media to grow their businesses. After the session, we had opportunity to talk to a number of IBs and CTAs (commodity trading advisors) about the challenges they encounter in building their businesses. Most rely heavily on cold calling, seminars, and referrals to generate new business. The common complaint we heard over and over is that these IBs and CTAs lack the time and resources to dedicate to building a presence online. As we looked at several of their websites and LinkedIn profiles, we discovered some consistent issues: Their websites often include a lot of educational content, but there is no lead capture mechanism to identify prospects who are using that content. The only lead capture form on most sites...

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