Q&A: William Gallwas, Striker Securities
William Gallwas of Striker Securities, an introducing broker which executes orders for clients which use third party trading systems, discusses trends in the packaged trading systems space.
AW: William, packaged futures trading systems were popular two decades ago but fell away. What’s driving increased interest in them now?
WG: In the early 2000’s many brokerage firms jumped quickly at the opportunity to auto-trade 3rd party trading systems as the concept was new and fresh. Looking back, I’d say hundreds of introducing brokers focused on this part of the industry and all the major clearing firms got involved to write and provide Letter of Directions (LODs) for the IBs that set out to auto-trade.
The internet was much younger two decades ago and people searched more freely. Brokerage firms displayed hypothetical results which was a mistake as hypothetical results most often do not match up with actual results. Hence, many clients lost money or were upset that outcome did not live up to expectations and trading systems’ popularity declined gradually over the years. It’s interesting to observe that many of these brokerage firms are now out of business or not in this space anymore.
The driving force today for increased interest is that there is a stronger demand for trading systems due to last year’s set back in U.S. and world stock markets. We are seeing a surge in interest for CTAs and System Developers.
AW: Many new CTAs are looking at making their trading system available with firms like Striker Securities as well as in a pooled fund vehicle. What’s the benefit to them of doing that?
WG: The first benefit is revenue: System developers and CTAs benefit as they are paid a monthly subscription fee. Striker, currently, is executing systems at fifteen (15) of the futures industry’s leading clearing firms. The developer is paid on a per contract basis; it’s lucrative.
The second benefit is exposure: Striker publishes on its website and in its newsletter the performance results, from actual trading, of a broad base of the 3rd party trading systems publicly available. Striker also provides other industry brokerage firms a unique "white label" package that allows them to service their clients with products based on trading systems that show full transparency. At present, over thirty (30) brokerage firms use the Striker white label.
AW: Fees are always a hot-button topic in alternative investments. Is going direct to the individual trading system a cheaper alternative for managed futures investors and if so are you seeing any asset flows going in that direction?
WG: Generally, trading system fees are less since the client does not pay the CTA or developer a monthly management fee and the client keeps 100% of the trading profit. But, if the monthly subscription is quite expensive, the traditional CTA route might be a better option for the client. But, the key benefit for the client is enjoyment of daily transparency since Striker’s website updates daily so the client can follow along and be “on” or “off” a system typically on one business day notice to the brokerage firm.
AW: Compliance is another hot topic in the managed futures funds industry. What benefits do systems like yours offer to the program creator and the investor?
WG: NFA, FINRA, and the Illinois Securities Department have all audited Striker’s site several times. It is important to understand that Striker reported results as a compliance solution to meet our “suitability” requirement under FINRA. Thus, the way the data is laid out today all trails back to the purpose to make it simple for the client to match their statement to Striker’s website. On a personal level, the compliance for all this rests on my shoulders.
William Gallwas is President of Striker Securities
© The Sortino Group Ltd
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency or other Reprographic Rights Organisation, without the written permission of the publisher. For more information about reprints from AlphaWeek, click here.