MMspire Trading Company Presentation to the Advisory Board Summer 2016 11 August 2016 5:15 pm Managing Partner: Leslie K. McNew Partner: Jonathan Markowitz Summer Manager: Hilary Towbin Internship Team: Dom DeMicco, Dillon Robinson, Garrett Swanson, Brad McNew, Elizabeth Gonzalez and Faraz Khan Rights remain with Professor Leslie K. McNew
Table of Contents MMspire Trading Company: Overview 3 Meet Our Team 4 Summer 2016: What We Do 5 The Basic Model: Sterling for Illustration 6 MMspire Trading Returns: Enhanced Trading With/Against Models 7 Summer Speculation Duties 8 MMspire Trading Returns: Summer Sunday Night Fundamental Calendar 9 MMspire Trading Returns: Summer Speculation Trading Plan 10 Components of the Trading Diary: The Daily Checklist (Every Morning) 11 Components of the Trading Diary: Trade Annotations 12 Components of the Trading Diary: Trading Log 13 Brexit 14 Daily P/L Reporting 15 MMspire Trading Returns: P/L by Trader by Currency Pair (Simulation Accounts) 16 Creating the Website 17 Compliance 18 Cumulative Error Reporting by Trader 19 Career Coaching with Coach JAM 20 Professional Networking 21 Marketing at Benedictine 22 Professor McNew s Courses 23 Our Advisory Board 24 Appendix 25 31 2
MMspire Trading Company: Overview What is MMspire Trading Company? An algorithmic trading company, trading spot EUR/USD, GBP/USD and USD/CAD through enhanced algorithmic trading as well as fundamental and technical speculation. We started in February 2016 and currently have a six month track record for managing a currency portfolio. A company designed to provide internships and career opportunities for young professionals in finance and trading; MMspire interns run every component of the business, An experiential learning tool that introduces students to the markets, teaching fundamental and technical analysis, how to build and execute viable trading plans, keep complete trading diaries and analyze performance, and manage risk 3
Meet Our Team: Summer 2016 Internship Gender Diversity Male 71.4% Female 28.6% 4
Summer 2016: What We Do We have continually run the models and traded with/against them for the summer. Summer Trader interns updated the models daily Three summer interns ran a simulation speculation book of $10,000 each against their self-devised trade with the trend trading plans. No one trader produced positive returns for twelve days running thus no one trader graduated to a real money book. Parameters Currencies: EUR, GBP, CAD only (for simulation trading) Size: 20,000 Notional Size Maximum $ Daily Stop $75.00 Timeframe: 8 am 11:30 am central time Monday - Thursday Trend Trade: WITH TREND ONLY: per individual trading plans 5
The Basic Model: Sterling for Illustration We are active in CAD, CHF, EUR, GBP spot markets (with models). Trend crosses SHORT when the 6 EMA < 12 EMA Entry signals: Trend crosses (delayed entry) Volatility triggers (optimized) must hit for entry on some models 6 EMA 12 EMA Trend crosses LONG when the 6 EMA > 12 EMA Exit signals: Trend crosses, GIRTH limit or take profit hit, resting stop order hit Parameters for limits/stops dependent on additional volatility triggers (optimized) 6
MMspire Trading Returns: Enhanced Trading With/Against Models Real Money Track Record Trader closes model s long position on bearish candlestick after discussion with Prof. McNew Model exit point for long position Model entry point for long position Returns calculated geometrically P/L data current as of 7/29/2016 7
Summer Speculation Duties Speculative Trader Sunday Night Trading Calendar Trading Plan Trading Diary Daily Profit/Loss Report Trader Audit Trading Plan Weekly fundamental calendar Daily trader checklist Trading analysis of each trade Annotated chart FXCM daily report Excel speculation log From Compliance Department P/L data current as of 7/29/2016 8
MMspire Trading Returns: Summer Sunday Night Fundamental Calendar Economic Calendar with technical trends Oil Market Market Trends for Each Currency 9
MMspire Trading Returns: Summer Speculation Trading Plan Speculative Traders only trade EUR, GBP, CAD IF THEN UNLESS Example: 10 > 20, Momentum + Go Long Bearish Engulfing, Double Top, or Hanging Man 8 am noon central time Lot size 20,000 notional Stop $75 daily Only trade in direction of trend: Trading Philosophy: With trend, follow ROC Defined If, Then, Unless Enter/Exit parameters 5-Min Trend 10 > 20 or 20 > 10? 10 > 20 20 > 10 Bearish Engulfing or Double Top? Bullish Engulfing or Double Bottom? No Yes No Buy with Stop Loss and Limit No Position may be taken Sell with Stop Loss and Limit 10
Components of the Trading Diary: The Daily Checklist (Every Morning) Relevance: Develop discipline in researching market each day Manages fundamental news throughout day Helps track what DIDN T work Compliance procedures are followed Track volatility on each currency Record 5-min and 4-hour trends, momentum, Fibonacci retracements, support and resistance levels Document fundamental indicators and the likely direction of $ Note macroeconomic events, important commodity prices, feelings 11
Components of the Trading Diary: Trade Annotations Trend 10>20, ROC + Trend 20>. 10, ROC - Relevance: Chart pattern recognition Learn to implement IF THEN UNLESS and look for a reason to enter/exit trade Learn from mistakes 12
Component of the Trading Diary: Trading Log FXCM Margin Requirements: EUR/USD - $260 GBP/USD - $300 USD/CAD - $200 Total Risk Capital - $760 Return on Risk Capital = Total P/L /Total Risk Capital Importance of Recording: By tracking statistics, traders understand their performance and how to improve it Draw correlations and study performance to alter trading plans yielding higher profits P/L data current as of 7/29/2016 13
Brexit Why is it relevant? Defines turning point in conversation about viability of European Union, including Eurozone Period of uncertainty for businesses and economies dependent on trade with U.K. Implications for London s domination of European financial industry Massive drop in value of GBP against all major currencies 18:00 No districts have reported votes yet; GBP at 1.48346 18:15 Sunderland votes to leave, 61% Leave to 39% Remain; GBP tanks 3.9% 21:35 UK Betting shows 86% Leave, 14% Remain; GBP crosses 1.40 handle downward 22:00 Betting odds favor Leave 94%, 6% Remain; GBP at 1.34922; 10% drop 22:45 BBC announces that Leave will win; GBP at 1.33089 1:00 Final Vote Count: Leave 51.9%, 17,410,742 votes; Remain 48.1%, 16,141,241 votes 7/5/16 21:10 GBP reaches 31-year low against at 1.28353 14
Daily P/L Reporting * See Appendix for Reporting Data Input 15
MMspire Trading Returns: P/L by Trader by Currency Pair (Simulation Accounts) 100% traders negative on GBP/USD 66% traders negative on EUR/USD 66% traders negative on the USD/CAD Brexit volatility and general economic uncertainty makes EUR, GBP tough to trade Commodity currencies like CAD saw less disruption than financial currencies like EUR and GBP, making USD/CAD easier to trade for novice trading team Total commissions paid to FXCM > Total MMspire Trading Profits: $0.80 * 189 EUR trades + $0.80 * 214 GBP trades + $1.20 * 164 CAD trades = $519.20 total commission paid (simulation) P/L data current as of 8/8/2016 16
Creating the Website Visit the MMspire Trading Company Website at: www.mmspiretrading.com Content on website includes: Description of MMspire business model, strategies, and trading Daily P/L reports, Win/Loss, Return On Risk Required skillset for interns: Quants and Web Master In developing the website, we: Organized a comprehensive project plan Assigned a daily maintenance and updates schedule Set deliverable roles and deadlines Coordinated content assignments and set due dates between team members 17
Compliance Responsibilities of Compliance Creating/ revising procedures knowledge continuation Daily Trader Audits to ensure that the trader is trading to his plan Error Reporting (See Appendix)* Providing procedural information to webmaster ensuring that we have a fully transparent and easily followed compliance environment Attending performance review Procedures Created this Summer: 1. Error Reporting Form 2. Error Reporting Procedure 3. Auditing of Trader Logs/ Trading Plans 4. Calendar Procedures 5. Marketing & Compliance Communication Procedures 6. Management Procedures 7. How to Write a Simple Trading Plan 8. How to Plan a Networking Site Visit 9. How to Develop a Trading Binder Errors are listed individually on the daily audit 18
Cumulative Error Reporting by Trader Since 15 June 2016: Total trades: 580 Total Trading Errors: 9 Error Rate: 1.55% Team GUI Errors: Total Errors: 8 Total Possible Days: 39 Total Days Worked: 150 Error Rate: 5.33% 19
Career Coaching with Coach JAM MMspire is committed to career coaching. Career coaching is a partnership between an individual and a coach where the person is assisted with identifying and achieving goals. In short, career coaching includes a wide variety of professional activities which help people deal with career-related challenges. A coaching relationship can take many forms. It can be through personal sessions, email correspondence, telephone calls, Skype, but the key to successful coaching is regular communication over a period of time. With Coach JAM Biweekly, hour-long career training seminars. Focus on potential interview questions and appropriate answers. General Questions Education Qualifications Leadership Career Progression Personal Questions Personality Questions End of Interview Questions Writing a McNew style resume Developing Cover Letters Gathering References Developing an Interview Folder Effective Networking http://imdiversity.com/featured-career-content/career-coaching-important-managing-career-21st-century/ 20
Professional Networking 08/03/2016: Open House for the Chicago CFA Society s new headquarters 08/02/2016: Chicago Federal Reserve Tour 07/28/2016: Meeting with Options Trader Alex DeJulius and FX Trader Mike Groff 07/27/2016: Lunch with Jim Harbaugh and Chicago Cubs game on Wrigleyville Rooftop 07/26/2016: Mr. Kottke s Birthday 07/20/2016: Meeting with Miss Natalie Dunn at Ceres Café 07/19/2016: Tour of Chicago s Rookery Building 07/13/2016: CFA Chicago Distinguished Speaker Series: Ms. Liz Ann Sonders, Chief Investment Strategist, Senior Vice President, Charles Schwab and Company, Windhaven Investment Committee 07/07/2016: Guest Speaker Peter Keenan, Director of Managed Investments, Kottke Associates 07/05/2015: Architectural Boat Tour on the Chicago River 06/30/2016: Networking Event at Carnivale 1. Jonathan Markowitz, Partner 2. Leslie McNew, Partner and advisory board chair of the MMspire Trading Company and Executive Scholar in Residence, Benedictine University 3. Mike Groff, FX trader, Gelber Group 4. Peter O Neill, Chief Risk Officer, Head of Finance for North America, Uniper Global Commodities North America 5. Natalie Dunn, Director of Financial Services, Uniper Global Commodities North America 6. Anthony Martone, Trade Desk Assistant, Uniper Global Commodities North America 7. Kevin Zielinski, Quantitative Analyst, Geneva Trading 8. Anika Allen Special Events Coordinator at American Lung Association 06/15/2016: CFA Best Practices in Risk Management at The Standard Club 06/11/2016: America s Cup at the University Club 06/06/2016: Futures Unbound: The Cato Summit on Financial Regulation, The Drake Hotel CFA Society Chicago Distinguished Speaker Series: Liz Ann Sonders Sightseeing in Chicago 21
Marketing at Benedictine Marketing Approach MMspire booth at Benedictine s orientation day Pitch opportunities with MMspire to finance classes Marketing posters hung in common areas of the finance building MMspire marketing material on bulletin boards around campus Recruiting efforts will target students with the skills MMspire needs: High level Excel skills Attention to detail Excellent written and oral communication skills Grit, determination, and a drive to succeed 22
Professor McNew s Courses FINA 365 Fundamental and Technical Currency Trading Fundamental and technical trading is driven by the practitioners knowledge of managing an enhanced algorithmic proprietary foreign exchange fund. The class will learn the basics of managing money and speculative trading on the basis of economic analysis, western and eastern technical analysis (with an emphasis on candlestick charting), and psychological attitudes. Students will produce and trade their own speculative trading plan: watch the market, analyze profitable situations, and produce winning trades. The class will manage a $50K simulation speculation book and will also watch the professor trade a real money book in class. This class is necessary if the student plans to enroll in the Talon Fund internship which is the Benedictine vehicle for the MMspire Trading internship: http://www.mmspiretrading.com/ Prerequisite FINA300. Department consent required. FINA 355 Talon Trading Fund The Talon Trading Fund is the feeder class for the MMspire Trading Company internship. MMspire is an enhanced algorithmic trading firm designed to provide financial internships and first career opportunities to young professionals in the Chicago area. Interns run the complete business of MMspire from back to front office. Interns are expected to cross train and manage several projects dynamically through our various business strategies: risk management, banking, treasury, compliance and marketing. We began this internship program with interns from Benedictine University last winter. This summer we have interns from Benedictine, DePaul, Kalamazoo College, Loyola University and SUNY Binghamton. http://www.mmspiretrading.com/ Prerequisite FINA300, FINA 365. The student may take FINA 365 concurrently with FINA 355. Department consent required. 2105 FINA 375 Energy Markets This course runs at a fast pace and focuses on the more immediately useful energy market portfolio skills: physicality of natural gas market (transportation, storage, basis), natural gas pricing, natural gas portfolio transactions including producer and consumer hedging, basis risk management, plain vanilla options and Asian option hedging for natural gas, transportation, transmission, natural gas portfolio VaR (all models reviewed), VaR simulation student produced (one and two factor), power pricing and risk management, weather hedging tools and calculations, credit derivatives and their use in energy, generation optimization and building forward curves, spark spread, crack spreads, frac spreads, oil basics 23
Our Advisory Board Leslie K. McNew -Chair, MMspire Trading Advisory Board, Executive Scholar in Residence, Benedictine University, Partner, MMspire Trading Jonathan Markowitz -Partner, MMspire Trading, Partner, Mocho Larissa J. Adameic Associate Professor at Benedictine University (Lisle, IL) Brian Andzik - Associate Vice President of Financial Planning at Morgan Stanley (Dayton, OH) Alejandro Arboleda Oil Trader at British Petroleum (Chicago, IL) Megan Arko LNG Optimization Analyst at Shell (Houston, TX) Kevin Beasley SVP Business Development, Midstream at Twin Eagle (Houston, TX) Drew Becker Marketing and Supply Specialist at Tidal Energy Marketing (U.S.) LLC (Houston, TX) Thomas Egan Portfolio Manager & Wealth Advisor at Trust Company of Illinois (Downers Grove, IL) Catherine Camerota - FX Analyst at Citizens Bank (Boston, MA) Jim Caron Portfolio Manager at Morgan Stanley (New York, NY) Daniel Collins Editor-In-Chief at Modern Trader Magazine (Chicago, IL) Robert Deis Market Risk Analyst at Koch Supply and Trading (Houston, TX) Danny Demko Restructuring Senior at Ernst & Young (Chicago, IL) Natalie S. Dunn Director of Financial Services at Uniper Global Commodities North America, LLC (Chicago, IL) Jeff Firestone Associate at Industry Capital Advisor and Co-founder & CEO at Flash Racks, LLC (Houston, TX) Michael Groff FX Trader at Gelber Group, LLC (Chicago, IL) Zachary Hadaway Junior Data Analyst at Mesirow Financial (Chicago, IL) Erica Hale Manager at The Kenrich Group LLC (Chicago, IL) Sean P. Harte Co-founder & CEO at Tribal Capital Markets, LLC (New York, NY) Anthony Martone Trade Desk Assistant at Uniper Global Commodities North America, LLC (Chicago, IL) Mary M. McDonnell Founder & President at McDonnell & Associates (Chicago, IL) Randy Myers Senior Director at Geneva Trading (Chicago, IL) Michael O Leary Platinum Client Relationship Manager at OptionsHouse & Aperature Group, LLC (Chicago, IL) Peter O Neill Chief Risk Officer & CFO at Uniper Global Commodities North America, LLC (Chicago, IL) Harry Plastik Vice President at Marcum Search, LLC (New York, NY) Mike Purcell Senior Vice President & CFO at Nuevo Midstream Dos (Houston, TX) Todd Schneck Pricing Analyst at EDF Trading (Houston, TX) Sewell Strifler Investment Banking Associate at Jeffries (Houston, TX) Abe Topham Structuring Manager at Sequent Energy Management (Houston, TX) Greg Trefz SVP Business Development at Republic Midstream, LLC and Partner at Scanlan Energy, LLC (Houston, TX) Peter West Lead Equity Basis Trader at Blue Fire Capital, LLC (Chicago, IL) Kevin Woeste Director of Operations and Technology at McSteen & Associates (Wickliffe, OH) Marianne Woodward Chief Resource Officer at Communities in Schools of Chicago (Chicago, IL) 24
Appendix: Error Reporting A sample error report is illustrated on the right. Below is a trader who has made an error and is living with the consequences of his actions the official MMspire Failing at the Eternal Quest temporary tattoo (must remain on his forehead for a full work day at the Chicago Board of Trade). 25
Appendix: List of Compliance Procedures The following is a list of procedures that Compliance has created throughout the summer: Auditing of Trader Logs/Trading Plans Developing an Interview Folder Error Reporting Procedure How to Build a Trading Binder How to Calculate 20-Day Annualized Historical Volatility How to Create an Advisory Board Presentation How-to Edit Advisory Board Presentation How to Plan a Networking Site Visit (like CATO, CFA, etc) How to Write a Simple Trading Plan Marketing & Compliance Communications Procedures MMspire Management Procedures Updating Meet Our Team Content Updating Networking Events Updating PL Reports Updating the Trader Calendar Procedure 26
Appendix P/L Reporting: Data Input 27
Appendix P/L Reporting: Data Input 28
Appendix P/L Reporting: Data Input 29
Appendix: FXCM Report Snip 30
APPENDIX: MODEL UPWARD AND DOWNWARD GIRTH EXIT GIRTH is the difference between the fast & slow EMAs *If GIRTH hits 70 model will trigger an exit signal (Upward GIRTH) *If GIRTH does not hit 70 model will signal an exit the second time 50 is hit (Downward GIRTH) Girth Value 90 80 Upward Girth Downward Girth 70 60 50 40 30 Trend 1: Upward Girth Hit, close the position. Trend 2: Do not hit the Upward Girth But hit the downward Girth Close Position 31