Gina McFadden is president of the Options Industry Council and executive vice president, industry services at The Options Clearing Corporation (OCC). She also sits on the steering committee of Women in Listed Derivatives (WILD), founded by Leslie Sutphen and Jessica Titlebaum. She sat down with Sarah Rudolph at the OIC’s offices in Chicago shortly before the IDX FIA/FOA International Derivatives Expo.
Q: You are going to attend the IDX conference in London on June 8 and 9. What will you be doing at the conference?
A: We’ll be attending the program, including the clearing panel, where Mike Walinskas [OIC senior vice president, risk management and membership] is a panelist. We also have some meetings scheduled, and we will hold a European Clearing Roundtable with OCC’s member firms to update them on operational issues, industry initiatives and OIC activities. Susan Milligan, Geri Love and I will participate, as will Gary Delany, our OIC Director of Marketing and Education in London. The roundtable is a great way to keep the lines of communication open with our European constituents.
I had hoped to attend the Women in Listed Derivatives (WILD) event in London but it conflicts with our roundtable. I’m sad about that, because I’m excited about the group and it’s great that it is being expanded to London, as well as New York City later this month. The WILD concept is long overdue. Jessica [Titlebaum] and her team have done a great job creating a mission, website and a survey for prospective members. While networking is a key element, the primary goal is career development for women in listed derivatives.
Q: Can you comment on the remarkable volatility in the industry lately?
A: Well, I can’t begin to say why, but I can say it’s helped volume, and it has also motivated investors to look at options. We feel that options are a great investment tool in any market, so they certainly are in volatile markets. Our investors can generate income, they can protect their portfolios, and they come to us to learn how to do all that. We’ve seen a great increase in interest in our programs.
We are just finishing up our live seminars for the first half of the year; we take a summer hiatus because there is not as much interest. We saw about 100 people on average at each live seminar, a really good number. We also did a couple of investor education days and drew about 100-200 people for each of those. We don’t take a break on the web site, however. We charge ahead. Investor interest in the web site is way up as well. Our registration for online classes is up 25 percent. We recently introduced weekly audio podcasts, which I think are fabulous. Joe Burgoyne, our consultant for both institutional and retail, hosts these podcasts wearing his retail hat. In addition to having a very distinctive voice, the topics are great, and he asks the right questions.
The podcasts are about 15 minutes each because that’s about the amount of time that you can keep someone’s attention. Of course, you can always go back and listen to it again. It covers all sorts of topics for any level of knowledge. He has great guests — he has some of our instructors, our reps on the call center, some outside guests who come in as well. It was a big undertaking, but it’s a great idea because you can be very topical, you can talk about strategies one week, or you can talk about what’s going on in the market.
We also continue to work on our educational partnerships. Our feeling is, why reinvent the wheel? We’ve got some great stuff out there online: curriculum for live seminars, all of our collateral materials. We offer it free of charge to members, non-members, exchanges. We’re up to over 60 partnerships, which is great because it leverages all of our educational materials and spreads the word.
Q: Can you mention any of those partnerships?
A: There are about six exchanges. FT in India is the newest, Tokyo, Thailand, Warsaw, MexDer-Asigna, Montreal/TMX — and we’re working on other international exchanges. We also became a member of AIE, the Alliance for Investor Education. It’s a non-profit. There are about 21 members; they come from leading non-profit and governmental organizations and self regulatory agencies and associations, so we’re up there with other big names, such as AAII, NFA, SIFMA. We’ll have a link to our web site and we’ll be able to have a section called “options.” This is new so we’re still working on it. We’ll list some of the basic classes for them. We were very pleased to be invited to join.
Another big OIC project is our financial advisor program, which we really focused on last year. We had tried to do that over the years but it’s hard when you don’t have a resource dedicated to that. Our guy, Eric Cott, is high energy – he just did about 40 branch office visits in 14 states. He is a dynamo. He has a heavy schedule of conference participation; he is a speaker and he networks with people. That’s going very well; we’ve seen a big increase in visitors to the FA web site. Also, there has been a 10 percent increase in calls to our call center from financial advisors. I think that tells a good story.
The other big piece of news you’re aware of is we’ve released the findings of the Harris Interactive study, the survey we do every five years that compares options users to non-options users. We kind of always brace ourselves – what are we going to find this time? – but we continue to find that options users are more affluent and better educated and trade more products more often than non-options users. That’s a very enticing story to tell to financial advisors because that profile is the perfect client. We’ve developed a brochure to help them understand more about options investors and learn about our product. It also helps us design programs for non-options users and options users.
Q: How did you get your start in the options industry?
A: I moved to Chicago not long after the CBOE had started, so that was all abuzz here. The Options Clearing Corp. was looking for people. I interviewed at a lot of different places but I clearly felt that the best opportunity I had out of all the job offers was at the OCC. It’s a great place to work.
Q: What is the biggest change you’ve seen in the industry over the time you’ve been here?
A: There are a lot of changes. The number of participant exchanges just kept growing and growing. The products went from fairly simple to more and more complicated. I think we started with call options, and since then you’ve seen whole a range of products added. The technology development over the years is astounding — small changes, and leaps and bounds. I also think the role of the Clearing Corp. has changed completely. We’ve always cleared and settled and provided risk management, but I think now it goes way beyond that. We have a lot of value-added services here. I think the whole critical nature of the Clearing Corporation has been recognized.
Q: Are there any new OCC or options projects and products coming up?
A: On the institutional side, we’re going to continue doing academic research. We are working again with UMass, who did the college strategy papers for us. The new study we’re doing with them is options strategies for managed portfolios such as hedge funds and mutual funds.
The other thing we’re working on I can’t be specific about yet, but later this year we will have two completely separate educational programs in the Asia-Pacific region. We’ll tell you more as we know more.
Q: Speaking of the Asia-Pacific region, how has options trading grown in areas of the world outside the U.S.?
A: In Europe, it has always been institutional not retail. That was I think a cultural mindset. Some of the banks promoted their own products where they would make more money on it rather than on a listed product. But I think that’s changing a little bit. We saw that years ago here. It was user-driven, where the investors are the ones pushing. That’s how it became mainstream here: a combination of the marketing and education done by OIC and the investors pushing — and they were pushing their brokers too. You see a little bit of that in Europe and certainly in Asia, too, where retail investors are open to any kind of product. So where it’s offered today they’re active, and where it’s planned to be offered, we expect them to be active.
Our philosophy there is, Why do we spend our time in Asia, in these developing markets? We feel that if you help them learn about the product there, they are going to trade there. But eventually everyone wants to come to the most liquid, most active markets in the world, so it does trickle down. Some of the studies we’ve done we haven’t updated recently, but you hear anecdotal comments, and up to 25 percent of the U.S. listed options volume actually comes from outside the U.S. That of course includes Canada and South America, Mexico, Asia and Europe, and other parts of the world — whether it’s institutional or retail.
The volume numbers speak for themselves; we just put out our press release — the first time we’re over 400 million contracts in a month and a 29 percent increase over May of 2009. And we’ve had seven consecutive record volume years. Given the market conditions, that’s phenomenal. I think everything contributes to that — the market conditions and education as well.