Firm Name: Ten Yard Capital, LLC
Principal: Adrian V. Fleisher, afleisher@tenyardcapital.com
Founded: May 2010, NFA Member Approval Dec 2011, Started Managing Monies Aug 2012
Number of Brokers: 1
NIBA Member Since: 2013
Address: 21381 Hawthorne Lane, Kildeer, IL
About the Firm:
How did you get started? Do you provide additional services besides brokerage?
From 2008 to 2010, I was employed with a firm as VP of Operations. There were three of us running the business. One partner was the face of the firm, the other partner managed monies. I was brought in to run the day to day operations thereby allowing the two partners to focus on their specific disciplines. As such, I spent a lot of time working on the nitty-gritty parts of the business. Website development, interviewing candidates, basic accounting, acting as the liaison with the NFA and our clearing firm, etc. Much of my time was dedicated to tedious work, but it did prove to be valuable.
In May of 2010, our firm took a very sizable hit because of the “flash-crash” on May 6, 2010. As a result of this, the partners went in different directions, and the firm was dissolved. The upside to this was my non-compete was rendered null. After several conversations between my wife and me, over coffee, in our kitchen, we determined that it would be absolutely silly to not proceed with my own firm. And Ten Yard Capital was born.
The initial concern was that I had spent several years working behind the scenes, and did not trade, let alone manage client monies. I took approximately a year of managing my own capital to wrap myself around the nuances of the market. During that time, I had a trusted individual review my business plan, and after reading it, he expressed his interest in becoming a client. Essentially, I had the first “golden client” waiting for me to start managing money. Now, approximately 18 months later, he has added to his account, and has made a referral. To say the least, I am elated by these stamps of approval!
How has hedging evolved since you first started the business?
Futures were first utilized, years ago, as a means for rice farmers in Japan to mitigate risk. Eventually grain farmers in the United States took up the process of managing risk through futures contracts. As a result if its geographic proximity to the early grain depots and slaughter yards, Chicago became a mecca for the futures industry. The industry has evolved over the years, and the level of complexity has also evolved with the needs of the business. With that stated, I believe it is always important to work in the context that this whole industry started as a result of the constant balance between hedging and speculation. Further, understanding the dynamics between hedging and speculation, and how they affect supply and demand, are important to understand when formulating trading decisions.
I started in the industry, many years ago, as a clerk in the grain room, at the Chicago Board of Trade. I clerked for one of the largest “Crushers” in the Soybean pit. Basically when you crush beans you get two products, that being soy meal soybean oil. As a clerk I was responsible for counting the cards for the trader who would buy one side (beans), and sell the products, or vice versa. We did the majority of our business in the front months, but there were times when we would initiate positions in the back months. It was a real-time, education by fire, of product and calendar arbitrage.
Hedging is utilized in the day-to-day operations of Ten Yard Capital. Ten Yard Capital deals specifically in the currency markets, and as such, currencies are quoted in relation to one another. A EUR/USD quote basically means “how many USD will it take to either buy, or sell one EUR”. So when you see the pairs EUR/USD and EUR/JPY, one must understand that the Euro is the base currency for each of the quotes noted above, while the USD and JPY are the “quote” currencies. There are always varying degrees of correlations, between pairs, which constantly fluctuate. When two specific pairs sync, one can use the relationship to either mitigate risk, or maximize gains.
A more complex relationship between three pairs, for example: EUR/USD, EUR/JPY, USD/JPY can be utilized to triangulate variance between actual pricing and calculated pricing between the three. If one is out of line, then technical and fundamental analysis can be used to determine the best course of action.
What do you believe to be the keys to your success?
I was indoctrinated into the business, learned how to trade, and learned how the industry works, on the floor of the CBOT. I had a good friend of mine who took me in and employed me, then became more of a mentor. Beyond picking up dry-cleaning and lunch, I went through the day to day rigors of being in an environment where people were literally fighting for money. It was eye opening. The floor was a boys club, and not what I would describe as gentlemanly in nature. Fist fights, grown men weeping on elevators, and the usual sophomoric humor found in that environment were all part of the daily routine. It was from this perspective that I saw the humanistic and psychological side of trading. I can tell you there is nothing like being in the pit, seeing and feeling a market go on a tear. “20 bid, 30 bid, 50 bid, 70 bid, even bid, 10 bid” as the market races, then one person steps out, and turns the market with “AT 20”. That was something to see and hear.
Most of those who enter into trading, and endeavor to manage monies, are really bright quant types, who make a ton of money, for coding the “algo-of-the-month”. Basically, if you are a math PhD, you are a rock-star, and are compensated as such. Screen trading is, by its very nature, sterile. Having the experience of seeing and feeling a market, is a completely different animal.
I often review fundamental analysis, and attempt to determine where the majority of the trading universe might get stuck, ie: where pricing might already be “baked in”. I utilize technical analysis to determine how I can capitalize upon this scenario. As a result of this, there are many times when the Commitment of Trade report shows that everyone is basically long, and in that scenario, I am usually short, or about to do so. Sometimes you have to be the person who steps out and says “AT 20”. The “other” key component beyond fundamental and technical analysis, is the emotional analysis. Outside of price action, charts reflect the greed and fear in a specific market.
How does your firm handle the burdens of compliance?
Compliance is a necessary process to our industry. It must be. As a Commodity Trading Advisor, I have taken on a fiduciary responsibility for the monies that have been entrusted to my firm. This should never be diluted or discounted. It is a heavy responsibility, which requires the compliance process. It is the compliance process that brings credibility to our industry.
I might be more involved with my business than others. For example, I wrote the disclosure document for my firm, and I urge all CTAs to be that involved. My opinion was that it is my business, I better have a deep working knowledge of that document. I utilized the NFA heavily during this process, and learned a ton while writing the document.
Specific to how I view the NFA, I tend to view the organization as a consultant. I pay them a bunch of money, and you can bet that I am going to get my value from this relationship. I believe that too many firms view their relationship with the NFA as adversarial. I have contacted the NFA regarding a myriad of different issues. For example, I put a call into the NFA prior to writing this. I wanted to verify that what I wrote was compliant-minded. They have always been very good at assisting me with the process.
All I can advise is that sugar and honey work way better than vinegar.
One of the unique aspects of your firm is that you are employee-owned. Tell us more about your unique structure.
It is all me. I make the trade decisions, and it is my hand on the mouse executing those trade decisions. It is a bunch of responsibility to do that, as well as attempt to raise capital, and develop the website, and remain compliant, and network, and…you get the point. On a side note, one of the sole reasons I attended the IB conference this past summer (in Chicago) was to network, and get in front of those who introduce. I was very surprised to find that I was one of the few CTAs in the room.
I have friends and business acquaintances that I can collaborate with, but I do not have the benefit of a room full of guys to collaborate with much like with the prior firm. I do miss that.
What trends are you most excited about/worried about?
While I understand it is the responsibility of the NFA to vet CTAs regarding compliance issues pertaining to AML, proper disclosure of potential risks, unethical sales practices, etc…Can someone please tell me where the idea for capital requirements for CTAs came from? CTA managers are essentially tradespeople, with a particular set of skills, to get the job done. Much like a plumber or an electrician, we have our license (3 and 34, possibly others) to work in our industry. We pay our dues to our regulatory agency (NFA) to assist in remaining compliant, and be held to a certain standard. I do not believe that having $50,000 in a business (or even held in escrow) account would benefit clients in any capacity. It is not under the auspice of the NFA to determine if the CTA is at risk to folding due to poor business management. Further, even if a firm does fold to poor management, all client monies are held with a clearing merchant, in the customer’s name. Simply stated, the CTA would not be able to abscond with the monies.
I am most excited regarding the growth prospects of the managed futures industry. The entire industry has evolved over the past five to eight years, for the better. Better oversight has equaled better management, and better opportunities for the industry. The vetting process is a challenging process, but it allows all CTAs to have a certain stamp of approval. The investing public has had the benefit of utilizing the internet to better understand their options regarding different investment vehicles. I look forward to the day where I can tell someone that I have a CTA, and they don’t ask me about accounting…
What do you believe producers are most concerned about today?
The lifeblood of this industry, AUM. Without capital, the program manager simply does not have the opportunity to make a living. CTAs and CPOs need the ability to raise capital, to have AUM to manage. Most CTAs like the idea of networking with IBs, and the potential to be that much closer to capital. The challenge is multi-faceted though. CTAs are not keen on switching their clearing to a different FCM because the IB requests it. Most traders/managers are pretty independent by nature, and are uninterested in having their business commandeered just to appease an IB.
CTA and CPO managers also wrestle with the vetting of IBs. Frankly stated, many of us started our businesses from scratch, proved our model, progressed to selling it, and we all be damned if we want to align ourselves with a morally inept IB. Thankfully, there are organizations like NIBA and the NFA to assist in the vetting. This also holds true for those who are traders, who would like to become fund managers, or money managers. These individuals are seeking a working environment where they can implement their strategy, make a living, and not be concerned with morally inept owners. These firms do exist, it takes some work to seek out the good ones. For all of the above, it is about due diligence. Be sure to do it!
Why did you join the NIBA and what value added does your NIBA membership give you/your firm?
I joined NIBA as a means to attend the conference, held here in Chicago, this past year. Given the relationship between the IB and CTA communities I thought it would be of benefit to attend. My goal was actually multifaceted. I was most interested in understanding what the IB community had to offer to an emerging CTA like mine. Second, I was interested in presenting what my firm does, how it is done, and how well it was done up to that point to those from the IB community. Basically, I thought it prudent to seek out an audience to make a soft pitch to, and see the response. I was very interested in finding out what the IB community would like in return for allocating. The time and monies, spent to attend, were well worth it. I was in front of a number of IBs, was able to make my pitch, and received ample feedback. It was great!
About their research department-
My filter is always on. It needs to be. Because of the interconnected nature of society, and the news, it is a must to be constantly aware of what is going on in the world. Some items are of great importance, others are far off of the scale. It is the job of the manager/trader to be able to differentiate. Outside of fundamentals, it is important to understand technical analysis in the market place. This proves true for several reasons. One specifically, when making a trade decision, if it is believed that a news report will have a certain effect, if that effect falls short, areas of support/resistance/congestion etc can be utilized to make trade decisions.
Technical support also becomes important when evaluating the typical market participants. Many enter into trading with the best of intentions, and the loftiest of goals. Unfortunately approximately 90% flame out during the first year. Most of these participants utilize the charting software packages provided on their trading platforms – rarely making any changes. As a result, the majority of the traders out there are all making the same poor decisions based upon the same indicators. So as a part of the trading strategy utilized by Ten Yard Capital, I use 7, 10, 200 moving averages – sometimes simple, sometimes exponential, Fibonacci sequence, and/or trend lines. To a lesser degree ichimoku cloud and MACD are also used. When these are overlaid, with proper fundamental analysis, they can be very useful in picking places where the general population is stuck the wrong way.
Sorry, but we are all fighting for money, in this gentlemen’s game.
Adrian V. Fleisher is Principal at Ten Yard Capital, LLC,
For more information visit: www.tenyardcaptial.com
