Primary Markets Traded:
Having been in the grain business since 1976 and at the KCBT since 1981; our expertise is grain futures and options. We primarily deal with commercial grain producers, processors and end users.
How did you get started? How did the firm get started?
After graduating from Milliken University I was hired by ADM. There I spent time at various facilities trading cash grain. After, I moved to Kansas City in 1981, I set up a futures clearing operation for the commodity trading side of ADM in addition to running two grain terminals in KC. In order to focus on futures in Kansas City, I made a career change to Conti Commodities managing their floor and clearing operations. In 1984 I took an opportunity with Gelderman to open a sales office predominantly handling commercial grain customers. A few years later they were purchased by MF Global and I continued running the floor and clearing operations and growing a sales office. In 2010, we changed from a branch office to a guaranteed IB continuing to execute for MF Global and other FCMS and money managers on a Give Up basis. In the fall of 2011, we registered with the NFA as an Independent Introducing Broker. This has enabled us to offer customers a choice in clearing firms.
Does the firm provide additional services besides brokerage?
In addition to brokerage we offer execution services primarily focusing on intermarket spreads and options. Having been in the grain business for 30 years, our brokers can provide individualized risk management strategies to our hedging customers whether they are producers, processors or end users.
What are the biggest challenges your clients face today? What does the firm do to help meet those challenges?
The biggest challenge facing our clients is the increased random volatility of the markets in general. In today’s world, it is imperative that our customers protect themselves from macro market influences as well as the risk associated with the specific commodity they are hedging. We do our best to make sure our customers are aware of factors that could adversely affect their positions. We do things such as overlay options on futures and use calendar spread options to ‘hedge the hedge’ so to speak.
How has the futures and options industry evolved since you first started in business?
The business is nothing at all like when I started. The biggest change came when academia decided that it was prudent for pension funds endowments etc. to invest in managed futures. This led to commodity futures becoming an investment class spawning massive hedge and index funds. This enormous amount of capital inflow dwarfed the commercial sector and in effect changed the correlation of cash to futures in all but the very long run.
What do you believe to be the keys to the firm’s success?
Electronic trading is now the norm and it seems to have depersonalized the business. Information is everywhere. I believe a key to our success is to stay focused on the customer and their specific needs. Instead of providing information to our customers we now help them interpret the information and distill it down to something manageable (sort the wheat from the chaff) Personal attention to customer needs never goes out of style.
What trends are you most excited about?
I’m not sure I could say I’m excited about this, but the volatility of the market is forcing companies that were previously able to offset risk in the cash market to need to develop hedging strategies in order to deal with the tremendous flat price swings we have seen in the last several years and to calm the fears of their financing partners.
What trends are you most worried about?
Broken record! Regulation costs are suffocating. We need to enforce the rules we have and get the politics out of it.
Why did you become a member of the NIBA?
We are a small group and we needed an avenue to see how others in the business were dealing with common problems. NIBA helps to keep us informed of regulatory and compliance issues and provides networking opportunities. In addition, we wanted to add our support to the organization in hopes that a unified voice would ring louder.
CONTACT:
Frank Stone
fstone@kctradinggroup.com
www.kctradinggroup.com
