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Sun 13 Jan 2008 12:04 AM

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Tricks of the trade

Arabian Business meets the men behind the Middle East's first trading hub for both professional and new traders.

Asked to picture a City trader, and many would conjure up images of brash, hard-working-hard-playing characters bedecked in loud jackets and equipped with even louder voices. However, we're a far cry from New York circa-Gordon Gekko, and the gentlemen tasked with providing the Middle East's first trading hub for both professional and new traders don't appear to be the sort to raise their voices unnecessarily.

Dubai Professional Trading Group (DPTG) is a joint venture between a team of experienced Dubai-based market professionals and the Dubai Multi Commodities Centre (DMCC), a Government of Dubai initiative. It's an attractive prospect too - members will be able to trade across the world's financial markets, enjoying globally competitive rates, a zero tax infrastructure and first class trading arcade facilities.

Ours is not an online or theoretical trading course — it’s run by experienced traders who have a track record in making money.

"We want to attract traders to come to Dubai and to bring some liquidity to the local markets, which are relatively new, yet offer a lot of opportunity," explains James Hume, Chairman of DPTG.

The company boasts a new purpose-built trading room, an open-plan workspace with 35 comfortable trading stations with high-end technical equipment, market information systems, risk management systems and reliable front and back office administrative support. Such facilities are designed to attract the best of the world's traders - and perhaps those looking for a little sunshine in the winter months?

"The fact that we're in a tax-free zone is an attraction, but then Dubai itself is more of an attraction that even we ever thought it would be," he smiles. "I think it's probably a good time to market to [experienced traders] when it's about freezing back in the UK, and they have to get up at about five o'clock to get ready to trade the European openings. The idea of changing to the ‘four hours in the winter, three hours in the summer' time difference means those same traders are going to have a far less grueling start to the day."

The tax situation is, of course, the most attractive prospect for high-volume traders used to making money across the world's markets. DPTG is looking to entice traders with a strong pipeline of business from fairly high tax environments, including Europe and the US. In addition, there is the opportunity offered by relatively untapped local markets, and Hume reveals that DPTG is on the verge of signing up its first "very heavy" trader.

Yet experienced traders represent only one aspect of DPTG's gameplan, and it is the search for new talent that marks the new venture's greatest challenge. In order to increase the number of traders operating within the business, applicants who have the unique combination of skills, attitude and motivation that DPTG considers the hallmark of successful and profitable trader will be invited onto a unique training course.

"We want to groom new traders, which will be part of the lifeblood of our arcade as we move forward," Hume explains. "We're unlikely to find those in Western Europe or the US; we're likely to find them here in the region and on the Indian subcontinent.

"We look for people who are numerate, have street smarts, and are quick on the draw," he continues. "We want people that will instantly spot opportunities, that certainly possess the ability to deal with risk and live with risk, and that are inquisitive, and have a desire to understand what's happening and why something's happening. We're looking for a variety of traits, some of which you can teach, but the majority of which you've either got, or you haven't got. It's down to instinct and common sense."

Hume anticipates that the first training course will begin in mid-February. It will take place over six months - the accepted minimum amount of time required to develop a trader to be confident in trading successfully - and each course holds no more than 10 applicants, commencing with a one month intensive training programme where no actual trading takes place.

"We're building our list at the moment, and though there is a range of people there, it has been surprisingly difficult," admits Hume. "It's much easier to spot existing traders, as you know where they are and where to go for them. But what we're bringing in is a relatively new concept for the region, and that takes time to take hold.

"I think it'll take a little bit of time to get the message over," he continues. "However, I firmly believe that when we've done that, it will be self-perpetuating, and we'll go from having to look around to being flooded with a vast pool of applicants. We'll be reeling from the numbers coming in, and very much cherry-picking the best."

There is no fee for the course as the sole purpose is to train the individual to become profitable. However, a minimum deposit of US$50,000 paid into an escrow account will be required for future margin requirements.

"We're only looking for active traders, and anything less than a US$50,000 minimum deposit would probably identify someone as not being a full-time active trader," explains Benedict Floyd, executive director at DPTG. "Our training course is fairly unique in the fact that it's run by experienced traders. It's not an online or theoretical training course - it's run by experienced traders who have a track record in making money.

"Our job is to make profitable traders - that's how we make our money - but at the same time we don't want to take six months to train someone up if they don't have the funds to trade," he adds. "We don't want to take people on who are on their last pennies. This is a business for people who do have some sort of backing behind them."

According to Hume, it is for this reason that DPTG has not yet sought to recruit university graduates. Not only do high-level academic qualifications matter little with regards to actual trading potential, recent graduates are unlikely to be able to meet the application requirements on financial grounds.

"We do bear in mind that most university graduates tend to be pretty impecunious, and are unlikely to have that kind of money," says Hume. "What we have to make sure we do is make sure that it's their own money. From a regulatory point of view we're not allowed to let traders trade third party money - we're not training investment managers, and our traders are not acting as a broker or giving investment advice."

The course's initial focus is on lower risk spread trading, so that trainees get to a point where they are able to place basic trades. This is coupled with core training in trading fundamentals, technical analysis, risk and money management and market psychology. Core training is followed by a five month mentoring programme with gradually increased trading activity. The courses will be taught in English, although DPTG has ensured that the international markets will be able to be viewed in Arabic if required.

"For us the emphasis is on getting the word out to potential trainees," insists Hume. "It's a new career, an exciting career that gives them great opportunities. We are prepared to put considerable effort into grooming them, actually at a considerable cost to ourselves."
Although they are quick to accept that the scheme isn't totally altruistic - profitable traders will make good money for DPTG - Hume and Floyd are bullish about the prospects for young would-be traders in the region.

"If our traders aren't profitable then we won't make any money - it is incumbent upon us to make them profitable," accepts Floyd. "History says that probably about 50% of the people we take on will make their mark. But if you can do it, then it's a great lifestyle. You get to choose when you work, what days, and a lot of people make a lot of money doing it."

About 50% of the people we take on will make their mark. But if you can do it, it’s a great lifestyle.

Moreover, he insists that market conditions in the region make 2008 an ideal time to move into trading. Market volatility and the corrections of the last two years mean that seasoned traders are reluctant to chance their arm on exchanges such as the Dubai Financial Market or Dubai International Financial Exchange. What DPTG offers is "a mile away from that", he claims.

"What we're offering is far more attractive, if people are willing to put the effort in and learn," suggests Floyd. "The markets now are very volatile, which for a trader who's going in and out of the market means that there's serious money to be made. The more volatile the market is the better - in fact we couldn't ask for more perfect market conditions to trade in."

Hume concurs. Since he first arrived in Dubai six years ago, the emirate has taken great strides in establishing itself as a leading financial centre in the region.

"We're not the only people that see that Dubai is going to become a major futures trading hub, and exchanges from all over the world are spending more and more time here," he notes. "If you look at the trading arcades around the world it has taken London around 400 years to really get established, New York 100 years, and Singapore about 20 years. So Dubai has pulled it together pretty swiftly from that point of view.

"From our point of view it's certainly feasible that we could have pulled together a trading arcade earlier, but from a perception point of view, now is the time to do it," he continues. "You see the rate at which Dubai is expanding, and it seems to have come of age now where it could use our assistance."

DPTG is certainly optimistic that the venture will prove a success. Indeed, future plans include the introduction in late 2008 of a second trading room, providing for 100 additional trading stations. There is also the potential for expansion throughout the region, and into the subcontinent.

"It's a concept we can take elsewhere, but not perhaps in the same way, as [Dubai] is where we're going to attract professional people to," explains Hume tactfully.

"Were one to try and replicate it in somewhere like Saudi Arabia, then it's unlikely that any experienced trader would want to come over," he continues.

"There is the opportunity, however, to train up new traders and there's no reason that couldn't be done in Riyadh, for example. What we don't want to do is just become an academic organisation."

If Hume and Floyd have their way, then the most academic thing about the venture will be their traders' profits. There may not be a trading floor in sight, but Gordon Gekko would be proud.

DPTG’s trading facesJames Humehas 25 years of diversified, comprehensive experience in the fields of Treasury and Investment Management, Global Private Banking and Treasury Product Development.

Hume moved to Dubai in 2002, leading the business development function for the Government's Dubai International Financial Centre (DIFC) initiative. He is also involved in other regional initiatives including renewable energy, base and precious metal trading, and trust administration.

Hume's career includes 16 years at the Bank of America, where he held a number of International positions including Global Treasurer - The Private Bank. Previously he spent 10 years in a variety of trading roles with King & Shaxson, Rothschild, Amex Bank and American Express. His academic qualifications include ACIB: (Chartered Institute of Bankers, London) and MBA - Business (San Francisco).

Benedict Floydjoined Credit Suisse Financial Products, the recognized world's leading bank in derivative trading, at the bank's inception as a fixed income trader and remained with the bank for 12 years, working in both London and Zurich.

In 2002, Floyd joined Bank of America in London as a director of foreign exchange forwards, moving in 2004 to proprietary trading, trading derivatives in all asset classes. Settling in Dubai in 2005, he launched Art Dubai, a contemporary art fair, which is now counted as one of the key annual events in Dubai - now partly owned by the Dubai Government.

Floyd joined the Dubai Gold and Commodity Exchange in 2006, the region's first derivative exchange, as General Manager of Product and Business Development, interacting with all parties involved in futures trading in the region and abroad. In this role, he was responsible for promoting the exchange and launching new products, including the world's first ever Indian Rupee future. In 2007, Floyd left the DGCX to join James Hume and the DMCC in setting up Dubai PTG.

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