Next week the world’s futures, options and OTC communities converge at the famed Chicago Hilton and Towers for the Futures Industry Association’s EXPO. If you are going to be in attendance, do you have a plan?
I have a plan. My plan is to learn as much as I can about the innovation on display by exchanges, technology firms and even regulators. I plan on hitting the EXPO exhibit hall and going booth to booth to find out what is new and interesting.
I have found some great opportunities and trading tools at EXPO. All the trading platforms I discovered and implemented, back when I was a broker, I found at EXPO.
In my role now, I am privileged to be pitched some great new technology. And I can tell you, there is some pretty cool innovations to be found at EXPO. You will learn about new technologies, but also about new trading instruments, exchange services and opportunities from the regulatory changes taking place.
And innovation is one of the three things we need to help our industry grow. The others are education and marketing.
Back in May I wrote a column that declared the trading world was in a recession. And I said the way out of it was innovation, education and marketing. As I mentioned yesterday, a leading futures industry figure said to me this week that our industry is in a depression. There is a healthy debate about what makes a depression versus a recession, but one factor seems to be the severity of the downturn. A more than 10% decline in GDP represents a key factor in the downturn being termed a depression. The other is the length of the decline.
We have now seen three quarters of declining volumes across asset classes. As I mentioned in June, if you measured industry GDP as volume times commissions or fees, GDP would have declined for two consecutive quarters. That is a recession. Now with three quarters, and given the severity of the decline, we could well be in a depression. In the trading world we are all used to drawdowns in our trading. It is a natural occurrence as sometimes we get on a bad streak and have several months of losing money. One feature of the severity of the drawdown is measured by how much money you lost from the peak of equity to the trough. What is your peak to trough drawdown?
Some investors don’t like to invest in a manager on the way up. They figure they are due for a drawdown and will invest after they see one.
We have seen the drawdown in the industry. The question is now how long will it last and will the volumes continue to drop lower. I don’t have a crystal ball so I can’t tell you. But what I can tell you is that this industry has seen slow downs before and the thing that spurred the next growth cycle was innovation, education and marketing. Where did the listed equity options market come from? It came from Chicago traders looking for something else to trade amid lackluster agriculture markets in the late 1960s and very early 1970s.
Where did the financial futures markets come from? The same motivation, to find new things to trade amid dramatic changes in global macroeconomic conditions and regulatory and monetary policies. Sound familiar?
The exchanges and industry also did a good job of educating the world about their new products, an effort which itself spurred the development of futures exchanges around the world. As we come to EXPO, we are seeing the results of those education efforts by the industry pioneers of the early 1970s.
And lastly, we need marketing. And EXPO is all about the marketing. EXPO is the single greatest marketing event in the industry. It is a place to see and be seen. It is a place to market your product, or market yourself. It is a place to connect with long lost friends and colleagues, a place to network face to face.
As I approach EXPO, I am looking for the ideas and innovations that are going to fuel the next great growth cycle in our markets. I am looking for the ideas that I can share through John Lothian News to help education efforts about the innovative products and tools I find interesting. I am looking for the drivers of the of growth that will generate new marketing efforts.
That is my plan. What is yours?