Magazine article Modern Trader

Can Floor Traders Find New Opportunities at Corporations?

Magazine article Modern Trader

Can Floor Traders Find New Opportunities at Corporations?

Article excerpt

Can floor traders find new opportunities at corporations?

To many futures and options traders, it sounds unthinkable: joining a multinational corporation and helping it manage its interest rate, currency and raw commodity exposures.

Working for a salary, dealing with large and unwieldy bureaucracies, the conservative nature of most senior corporate executives - certainly, all of these would turn off any trader who might think of making a foray into corporate America.

It sounds unthinkable, too, to many corporate treasurers and chief financial officers. They contend traders lack the management experience and knowledge of corporate finance needed to survive and would miss the chaotic activity of the trading floors.

"If you want to be a trader it's not going to be here," says Barbara Byrnes, director of corporate finance at Baxter International, a Deerfield, Ill., health care firm that hedges its interest rate and currency risks.

Adds Matt Matthews, vice president of foreign exchange marketing at First National Bank of Chicago, "To go from being a local to working for McDonald's is not an easy thing to do. When you become a trader, you're looking to make it really big, in which case you want to make $5 million and retire by the time you're 45. And if you start thinking about working for a corporation, I wonder if it's a sign that you haven't achieved that goal."

Historically, corporations expanding their trading activities have taken seasoned corporate executives and let them learn the markets and financial instruments as needed.

"As companies have gotten their own programs going, they have chosen executives already familiar with the company, its goals and finances to manage them," says Gregory E. Pearson, former treasury executive at Borg Warner Acceptance Corp. and Household International, now vice president and chief administrative officer at Chicago's Barnes & Co., a futures commission merchant.

"Corporations have training programs, accounting and auditing departments, and all the necessary resources to become more aggressive in the markets and analyze financing alternatives," Pearson says. "Companies like Household are in the forefront of the capital markets with long- and short-term debt totaling about $8 billion, and they have the luxury of being shown every new product in the investment banking area. So it has made sense to rely on your own people and resources rather than going outside for staffing."

Nevertheless, a handful of treasury executives at major corporations believe that, if not immediately, within the next several years companies will begin adding traders to their ranks.

Some already have. Eastman Kodak employs three traders to run a separate, for-profit trading operation that's not responsible for its hedging.

Trader demand should be spurred by an increase in corporate hedging activity and, in some cases, the creation of corporate trading rooms such as Kodak's, dedicated to speculation as well as hedging.

Interpreting new tools

Also contributing may be a desire on the part of some corporations to move closer to day-to-day capital markets activity. And traders may be useful in interpreting the exploding number of financing tools being offered by investment bankers and in finding ways to use those tools to the corporation's advantage.

Says Tom Bernazzoli, an international treasury analyst at Eaton Corp. in Cleveland, makers of products for the automotive, defense and industrial industries: "The expertise a trader could bring to a corporation is very important. You can't get a good feel for the markets sitting in an office in Cleveland, Ohio."

David Fiedler, director of foreign exchange planning at Eastman Kodak, is more emphatic.

"I do think this is going to be a trend. Corporations are going to have an increasing appetite for people with a trading background, and somewhere in their organization they are going to find a place for them," Fiedler says. …

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