The next generation of traders

September 17, 2016 09:00 AM
For many years Futures/Modern Trader annually profiled the top commodity trading advisors and top emerging managers in the industry.

For many years Futures/Modern Trader annually profiled the top commodity trading advisors and top emerging managers in the industry. It was always fascinating to hear the stories on how traders got started in the business. There was almost always a mentor involved, or in the case of some of the early systematic trend following pioneers, new technology to exploit. But as we go into in greater detail in “Let traders trade” (page 68), the world is a different place with the emergence of high-frequency trading and the regulatory changes that followed the 2008 credit crisis and various other trading scandals. 

Our cover feature, “Finding the next top traders” (page 16), highlights innovative platforms where potential allocators are finding and, in some cases, incubating tomorrow’s trading all-stars. 

What appears to be happening is an attempt to split the discipline of trading from that of building a successful trading business. Since good traders aren’t necessarily good at running a trading business and vice versa, this makes sense. 

The other big change we have observed is the movement to the quantitative approach to trading. In “Teaching tomorrow’s traders” (page 24), University of Chicago’s Bernardo Jorge describes the greater interest by recruiters in students with solid math and science backgrounds and how the University is listening to the street in building an advanced graduate studies math program that will provide top firms with trading talent.

 In “Recruiting in the age of algos” (page 26), Wolfrank Guzman talks to recruiters who say their clients are looking for prospects with STEM (science, technology, engineering and mathematics) backgrounds. The story also illustrates how the movement towards algorithmic trading has mirrored the movement towards electronic markets. 

 It doesn’t seem that long ago that the broader investment universe looked at the managed futures world, with its concentration in systematic trend following, as a type of witchcraft. The equity world tended to like market gurus who knew the fundamentals of a stock and had a gift for predicting where it would go next. 

Boy, have things changed. In “Mr. Wonderful has an ETF” (page 36), we interview Kevin O’Leary of “Shark Tank” fame who has recently rolled out a family of rules-based exchange traded funds. What makes his O’Shares unique is that they are built and rebalanced in a completely systematic fashion, paying close attention to diversification and concentration risk. John Henry would be proud. 

O’Leary also discusses the phenomena of “Shark Tank” and how today’s millennials take a global approach to entrepreneurship. 

In this month’s market focus we take a look at the social media sector highlighting which stocks are “in” and which are likely “out.” In “Can Twitter survive” (page 32), Garrett Baldwin takes a critical look at the problems facing the social media giant. While one would think the company would be on an upswing due to all the free advertising emanating from the Donald Trump campaign and his apparent addiction to late-night tweets, its stock has been in a freefall since the spring of 2015 and there have been rumors of a takeover. While unable to keep it shorter than 140 characters, Baldwin provides a detailed analysis of Twitter’s recent troubles and the possibility of a potential acquisition. 

Speaking of acquisitions, M&A activity in the technology sector is hot. In “The 9 hottest tech companies that could be acquired next” (page 30), Jiri Kram handicaps the most likely acquisition targets as well as the likely acquirers. Traders in the tech sector need to read this as just a rumor of an acquisition can send volatility in the stocks of potential targets and acquirers soaring. 

Rounding out our look at where the next top traders will come from, longtime contributor Leslie McNew describes an innovative internship program teaching students the basics of trading (see “Learning the trade,” page 62). And Steve Lord tells us what he learned from attending a BattleFin event, which attempts to find emerging traders through its unique trading competition (see “BattleFin: An emerging manager’s best weapon,” page 22). 

As we note in the cover story, the answer to where the next top traders will come from is probably, “all of the above.” 

 

 

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.