NIBA Member Spotlight on The Windham Group
Firm Name: The Windham Group, Inc.
About the Firm:
How did you get started? Do you provide additional services besides brokerage?
After working for thirteen years with Cargill Investor Services, primarily in the energy futures area, I left the firm to join ING Derivatives to head up their New York branch office. But after two years with the firm ING decided to exit the futures business, and I set off on mine own and established my own firm The Windham Group, an IB specializing in the energy futures and options markets. We had a tremendous advantage in being able to tap into the client relationships that we had developed over the years at both CIS and ING to help get the firm started.
Over the years we have provided consulting and research services to some small to medium size customers in helping them to understand their price risk and hedging options, even if they were not in a position to have us handle their actual futures execution and clearing needs.
What are the biggest challenges your clients face today, and how do you help them?
I think some of the biggest challenges facing our customers today are trying to understand the rapidly changing dynamics of the commodity markets and in particular the energy markets. We have witnessed the trading dynamic change from open outcry to electronic matching of customer orders. Then this electronic market place has dramatically evolved in a few short years in which HFT activities can at times create rapid price distortions that never existed in this marketplace prior. In addition with the proliferation of hedge funds across the globe we have seen energy futures move from a commercial commodity market to one in which it is treated principally as a financial asset.
Through all these changes though we try to help our customers navigate these ever changing waters to prudently utilize the markets for their hedging needs and not to be caught up in the 24/7 noise of the markets.
How has hedging evolved since you first started the business?
I think when I first started over 30 years ago in this industry, technical analysis was a side thought for many a commercial trader especially in the oil markets. Options were not even available as a tradable instrument. Today the hedger must now weigh not only the supply demand analysis of their markets but the technical chart patterns to fully evaluate their price risks, short, intermediate and long term. Then the hedger must choose from a labyrinth of various hedging instruments which can at times increase a hedger’s uncertainty even further as they attempt to choose from a benchmark futures contracts to financial basis futures, swaps and options. The evaluation of each of these individual contracts must not only include price but liquidity and counterparty risk of exchange or off exchange traded instruments. To further complicate the role of a hedger is the demands by regulators for timely and accurate reporting details.
What do you believe to be the keys to your success?
I think the keys to our success have been our clients. While this might seem a tired old expression it has been the bedrock to our success to this date. We know we lag behind many of our competitors in signing up new clients on a monthly or annual basis, but we pride ourselves in being able to not only retain but strengthen our relationship with our existing clients on an ongoing basis. As a result many of our new accounts come from referrals from our existing client base. We have always felt that if the only way you can compete in the market place is on price then you are always at risk for losing your client base when then next price discounter attempts to muscle their way into the market simply being happy with grabbing market share at the expense of profitability.
How does your firm handle the burdens of compliance?
This is probably one of the areas that I think is the greatest threat to the survival of the introducing broker. We look to the NIBA as well as the compliance departments of our FCM’s to help us understand the rapidly and increasing burdens of compliance requirements by regulators which develop policies with a broad brush, which unfortunately many times places the same requirements of a multinational corporation on a four or five person shop, which in many cases is not even performing the same client or trade execution function in the market place.
Tell us about your research department
We have always attempted to provide a fundamental research approach to our clients. With this said we do not attempt to provide the volume of pages of macro research that a major bank research department can churn out on a daily basis but rather what can a trader absorb quickly, since most have too many demands on their time already. We look for concepts that are particularly salient to the futures market and how that can impact their hedging decisions. We are always look at trying to understand the futures market first, since we are a futures broker and that is what are clients are looking for assistance in understanding.
Why did you join the NIBA and what value added does your NIBA membership give you/your firm?
We believe it is important to support an organization that provides an active voice to our particular industry’s concerns and needs. Without this organization we feel the voice of the IB’s would be lost among the cacophony of other voices of other financial firms or sectors that may be better capitalized or more politically connected.