Head Traders Discuss What It Takes to Manage a Trading Desk

Advanced Trading's Randall S. Devere spoke with some prominent head traders about what it takes to manage a trading desk. What quickly emerged is a portrait of a group that has to think well outside the parameters of buying and selling - particularly those who trade for or run their own hedge funds.

Asked what keeps him up at night, Scalone says ruefully, "The markets always keep me up at night." Still, he notes, he spends more time thinking about the positives -- such as the satisfaction of growing a business with $650 million in client assets under management from scratch. "It really is a kick to build something -- whether it's a hedge fund or widgets," Scalone says. "It's like building a model airplane -- when it flies, there's a huge rush."

A Veteran's Savvy
FX Concepts' Phil Simotas is generally sanguine about the market's recent roller-coaster ride. According to Simotas, "We lost money like most managers, but we did well to limit the damage. Meanwhile, our systems should perform well if volatility continues to increase."

Simotas and FX Concepts have seen it all, with a track record and size that are rare in the alternative investment community. Founded in 1987 by John Taylor, FX Concepts now manages more than $12.5 billion in absolute return and currency overlay programs for institutional clients around the world. Simotas joined the firm in 1993, and as president and director of investment management, oversees the firm's trading, portfolio administration, client servicing, investment research and marketing.

While other trading desks may have struggled to keep up with the volumes and volatility of the markets on Feb. 28, March 1 and March 2, "those days had no impact on either our investment process or our execution," says Simotas. "They were simply a good test -- our systems and processes were designed to be able to accommodate those kinds of events, and they handled them well."

A large reason for that success is that the firm has made a major commitment to electronic trading. FX Concepts is in the process of upgrading its proprietary trading system, an effort that is being spearheaded by chief technology officer Kelly Adams. The firm, according to Simotas, executes about 30 percent of its trades electronically.

Integra has a staff of 20 in its Boca Raton headquarters, which features a mix of homegrown and vendor technology. Among the firm's in-house-built technology are many of its trading systems, Scalone relates. "Technology is important for a fund," he says. "It's really your lifeline."

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