Sep 07, 2018 CTA Expo and NIBA are being held in Chicago this month. At each conference everyone will be talking about how to expand the managed futures industry. In light of this, Turnkey decided to re-visit an article we had published several years ago. Although the commentary has been available for several years the message still rings true today. How can the alternative investments industry find and develop strong Commodity Trading Advisors (“CTAs”)? What can be done to better promote managed futures product that resonates with investors? Turnkey examines these questions and several others that Introducing Brokers (“IBs) and Futures Commission Merchants (“FCMs”) should be answering to help expand the managed futures industry. Introducing Brokers and FCMs Need To Be Different The brokerage industry has been consolidating. It is not the industry it used to be even ten years ago. One way to try and reverse this trend is to find ways to expand the industry through stronger promotion of the managed futures, alternative investment space. To do this, there is no need to have some supernatural or uncanny ability to pick the best CTA’s. Rather, the focus should be on becoming incredibly well versed about the advantages and disadvantages of this asset class. After a strong understanding of the space has been obtained then work toward offering better and more diverse CTA options to customers must begin. Having even a handful of CTAs that have been properly vetted and whom are solid performers can make all the difference in the world for a brokerage. So how does one go about finding the “right” managers? Where are they hiding? Find a Niche and Become an Expert Many IB’s and FCMs have made a name for themselves by finding a niche within the managed futures space. As an example some brokers are the best at sourcing and offering systematic or purely discretionary CTA’s. Some brokers focus on their extensive knowledge of a specific commodity market. Other brokers have experience in constructing portfolios for larger clients looking to allocate to a variety of managers. Whatever a brokerage firm is best at needs to be exploited. After deciding on a niche to be targeted then scour the numerous CTA databases to find the types of money managers which could be a fit. After finding these managers take the time to call them, ask them about how they trade, request their disclosure documents, and in general evaluate them as if you’d invest your own personal funds with them. This process should be very thorough and may take weeks, months, or in rare cases even years to complete. Whatever metric is used to decide to evaluate managers do not be bashful about asking tough questions and do not cut corners. Developing New CTA’s Turnkey Trading Partners has made a name for itself helping small to medium sized brokerage firms of all types become operationally successful. Through this experience we have worked with many sole-proprietors turned CTA and helped them find a pathway to success. Where did these sole-proprietors learn to trade before they came to us? Many of them were trading independently through firms just like yours. Any brokerage firm with self-directed traders on the books knows their customers. They see their trades. They can even tell from watching over the years which accounts are consistent and those that aren’t. Has your brokerage firm thought about presenting the option of becoming a CTA to any of these consistent and successful self-directed clients? Helping Traders Become Managers If an identified trader has shown interest in becoming a registered NFA member CTA they’ll likely need help to develop their business. If and when this happens brokerage firms will have three basic options: Tell the trader that your firm can’t help them (basically not an option). Develop internal staff to assist them with their procedures, track record and company accounting, disclosure documents, registration, marketing, and everything else required to become a CTA. (probably not a good option) Outsource this work to a company specializing in assisting startup CTAs like Turnkey. At Turnkey Trading Partners we regularly work with Futures Commission Merchants and Introducing Brokers to help them get traders from all over the world set up as registered CTA’s. In fact we have established hundreds of CTAs over the decade we’ve been in business. With Turnkey’s assistance brokerage firms are able to add tremendous value to their customers without any out of pocket costs. Similarly these firms benefit from having unique emerging CTA product for their other clients to consider. Most importantly though, the brokers Turnkey works with to develop CTA talent haven’t disrupted their relationship with their previously self-directed, individual trader. Rather the original relationship remains intact while commissions likely remain the same and/or grow as the manager grows. Our Industry Needs More CTAs Many of the emerging CTA’s Turnkey has worked with decided to register because someone, somewhere heard they were a good trader. That someone, whether it was a friend, family member, or their broker planted the seed to get them thinking about becoming a professional money manager. Many of these traders had never thought about managing money for other people but love the idea of doing so as a Commodity Trading Advisor. In almost every instance all they needed to consider starting a CTA was someone taking note of how they were able to trade for their personal account. As a broker be that someone. Our industry needs more CTA talent to expand. About Turnkey Trading Partners Turnkey Trading Partners provides customized support to the brokerage and trading industry. We can assist Commodity Trading Advisors (“CTA”), Commodity Pool Operators (“CPO”), Introducing Brokers (“IB”), and Futures Commission Merchant’s working within the alternative investments space. We can also assist Registered Investment Advisors (“RIAs”) and Broker Dealers (“BDs”) within the traditional equities marketplace. Our team is well versed in both operational and regulatory matters relating to commodity futures, equities, bonds, options, swaps, forex, cash and physical trading, as well as several other specialized OTC financial markets transaction types. Our central office is in downtown Chicago, the alternatives trading capital of, and one of the biggest equity markets in the United States. We also have an office located in Ft. Lauderdale, Florida one of the fastest growing trading communities in the country. Contact us today via phone at (312) 324-0040 or email firstname.lastname@example.org.