Remote traders are at home with growing trend
By David Oakley, Capital Markets Correspondent
Published: May 26 2007 03:00 | Last updated: May 26 2007 03:00
The residential streets of Bromley are not usually associated with the trading of sophisticated derivatives.
But London's unassuming suburbs are now home to a growing number of speculators trading short-term interest rate futures from the comfort of their own living rooms or offices.
Trading volumes from remote traders have surged 15 per cent this year, faster than ever before, according to Euronext Liffe and Eurex, the two leading derivatives exchanges in Europe.
These short-term speculators, many former City traders, are benefiting from new technology that enables them to make the most of near record highs in the equity and bond markets.
But they are driven by a desire for work-life balance. Setting up offices in or near their homes enables them to avoid the hassle of commuting while still potentially making big profits.
"Independent proprietary traders have been a major driving force in the growth of our short-term interest rate markets," says Amanda Sudworth, director of fixed income at Euronext Liffe. "Their volume can account for anything up to 50 per cent of total volume."
Most of the 4,500 remote traders in Europe are based in London and the south-east, while many others have set up operations in places such as South Africa and India.
Michael Jacobs, who trades millions of euros a day for his company Met Traders in West Hampstead, which also has offices in South Africa, said: "It is definitely a lifestyle choice. I live nearby and don't have the problems of commuting or parking. I don't have to wear a suit and I can make a good living. So many of my friends, like me who worked in the City, are doing the same."
The surge in remote trading has also been attributed to the rise of so-called black box technology over the past 18 months.
Black box trading, widely used by investment banks and hedge funds, uses a computer programme to buy or sell securities according to the economic data and technical market information it is given. The skill is in keying in the right information.
Peter Green, chief executive of the Kyte Group, one of the City's leading brokers, said: "People are getting more innovative, utilising software to help them trade. If you combine the ability of a trader with that of a software expert, you get smarter trades."
These remote traders are now responsible for €480bn (£325bn) in the average daily turnover of the flagship futures contracts of Euro-next Liffe and Eurex, where the bulk of remote trading transactions are made.
Rob Brophy, a former Liffe pit trader and now director of On Screen Trading Connections, a remote trading company, based near his home in Bromley, said: "We do account for a lot of the volume on the exchanges and it is the ideal thing, if you can do it, to make a lot of money, but still live near your home and family."
There are also opportunities to travel to some of the world's most exotic locations. Andrew Dempster used to trade from a humdrum office in the City. Now he has a panoramic view of Table Mountain in an open plan office overlooking Cape Town. Mr Dempster, who works in Met Traders' South African office, said: "I went cage diving with great white sharks at the weekend. It certainly beats rainy days in London."
How they make their money
Remote traders
Seek to make money from the quick buying and selling of futures - usuallly short-term interest rates - by plugging directly into exchanges from afar. There are about 4,500 remote traders in Europe, according to current estimates, and their operations range from small five- or 10-man bands to large groups numbering 40 or more.
The exchanges
In Europe, remote traders mainly buy and sell on Euronext Liffe and Eurex, Europe's two main derivatives exchanges, because their flagship interest rate futures contracts are so liquid, enabling big profits to be made on small movements in price. The London-based ICE Futures exchange, which trades oil and gas futures, is also used but to a much lesser extent.
Black box trading
An automated computer trading technique, also called algorithmic trading, that allows the trader to key in information, from economic data to technical market movements. The computer program will then trade using this information. The trick is to key in the right data.
Copyright The Financial Times Limited 2007 |
