AI Magazine Issue 3 2017

Acquisition International - March 2017 45 Maverick Trading: The Top Winner in a Brutal Industry rebates, Maverick is able to tailor every aspect of its business toward its traders making profitable trades. This is a logical, but unfortunately novel concept among traditional prop firms. Becoming a trader at Maverick Trading is not an inconsequential affair. Traders are required to complete a series of steps introducing them to the firm, its focus, an overview of its trading methodology and risk management philosophy, and its culture. Candidate traders that exhibit promise and tenacity are then interviewed, often multiple times, by the firm’s team of recruiters. In another contrast to many prop firms, Maverick’s recruiters are active and experienced traders themselves. Darren Fischer, Head Recruiter at Maverick Trading was quoted as saying, “Our entire recruiting process is specifically designed to weed out people who either aren’t suited to trading with us or aren’t serious about investing the time and energy it takes to become a professional trader. Overall, our acceptance rate runs between three and five percent of applicants. Prior trading experience is far less important to us than a demonstrated commitment to the firm’s principles and philosophy. This bears itself out in our retention rate.” Maverick’s retention rate among its traders appears to be the highest in the industry, exceeding 90 percent retention yearly. When asked about the firm’s retention, Fischer replied, “People come to us because we make money. They only stay with us if they make money.” Indeed, Maverick Trading has a proven track record in generating profits, even in adverse market conditions. Since the last major market top, as considered from January 2008 through present, the firm’s Options Division portfolio has generated in excess of 600 points of alpha (defined as performance compared to the S&P 500 Index). Not satisfied with its prior concentration in options, the firm opened an FX Division in 2009 specifically for trading foreign currencies. The firm’s target returns for its FX Division are a standard 2,400 pips (price interest point; measure of price movement in currency exchange rates) yearly, with the FX portfolio routinely exceeding this goal. In 2016, Maverick’s FX portfolio returned nearly 3,000 pips profit. These returns beg the question of how Maverick Trading has been able to achieve such performance on such a consistent basis. When asked, Robb Reinhold, CEO and Head Trader at Maverick responded, “Are you talking strategically (at the firm level) or tactically (at the trader level)? If you’re talking strategically, we use a top-down approach coupled with multi-level risk management and use options almost exclusively. If you’re talking tactically, it comes down to our traders. At that level, I’d say you’re looking at several factors: the selectivity we exercise in bringing traders on board, the training we provide, the ongoing support we offer, access to significant capital, and the supportive and collaborative culture of the firm as a whole. It becomes a five-legged stool. As odd as a five-legged stool sounds, if you remove one of the legs, performance suffers significantly. Most traditional prop firms just talk about access to capital, which is a one-legged stool that is bound to tip over at some point.” Reinhold’s comments are borne out in an examination of the firm’s operations. Traders new to Maverick Trading are required to complete the firm’s in-house training program, regardless of experience, which can typically range from a minimum of two months to six months for someone new to the industry. Maverick’s COO, Jon Frohlich talked about the firm’s training programs. “It doesn’t matter if you’re talking Options or FX Divisions. In either, you’re essentially looking at a graduate level syllabus in how to trade those particular instruments. We routinely get traders from other firms who come to us and are blown over by the extent of the training and support they receive. We’ve actually had a couple hedge funds send traders to us to see what we’re doing, looking to adopt aspects of our methods and risk management into their own portfolios.” Not content with a bolus of initial training, Maverick invests extensive resources in ongoing support to its traders. Traders meet several times weekly via webinar, receive market commentary, live trade alerts as the firm’s portfolio enters or exits a trade, as well as access to individual coaching. We caught up with Joe Jensen, Maverick’s Head of Coaching, as he was in between calls with traders. “Everyone needs coaching at some point in time. We’re all going to hit rough patches or want advice on how to handle a situation. All our traders are remote, but we tell them that if they ever feel alone, they need to pick up the phone and talk to someone. The last thing we want is for someone to be in a situation they don’t know how to get out of and to suffer in silence.” The future for Maverick Trading looks bright both near- and long-term. Maverick’s management states that it has more than adequate capital to double the number of traders, but that growth will remain measured to ensure traders receive the proper support necessary to succeed. On the drawing board are preliminary expansion plans to either the UK or Australia to meet the demand for retail FX trading as well as American-style options trading. The prop industry may never reach the zenith in pure numbers that it achieved in the late 1990s, but for a select group of traders at Maverick Trading, the dreams the prop industry promised back then are alive and well now and in the future.