For Part 1 of this interview between our VP of Customer Success Kara Grygotis and Brynne Kelly, see Breaking Through: Brynne Kelly, Part 1.
Kara: You’ve mentioned that your time trading electricity at Aquila was a key moment because the relationships you formed there created opportunities throughout your career. That leads into my next question: what do you do to get, network or exchange information, whether it’s from other traders or peers or an online source now? What’s your information-gathering mechanism?
Brynne: It has changed so much. In the early ‘90s and early 2000s, the exchange of information was fairly straightforward. It was at industry events. There were big shindigs, like Day of the Trader in New Orleans. That’s when you went and saw your peers in the market.
Before there were clearing banks, when you executed a deal through your broker, you’d say, “Lift that offer,” and they’d say, “OK, you got them.” And you’d say, “Who am I done with?” Then they’d say, “Oh, you’re done with Enron, Joe Smith.” And you’d write that trade down. So you knew who all of your competition was in the market. Every trader was revealed to you.
So at these industry events, you were now meeting these people that you knew were the traders at the company. You were sizing them up as a human being because that was your counterpart. And you certainly would want to form relationships with them so that they wouldn’t run you over in the market.
From an external standpoint, getting information came from meeting your competition, initially. Then, of course, information came from the desk, the people who were physically talking to counterparties. You had people on the desk all day long calling up direct-end consumers and producers and getting information.
So now you start to have this whole network. Day-to-day, you were trying to figure out why markets were moving.
Kara: How has that evolved through the years?
Brynne: It evolved to online chat rooms like AOL Instant Messenger. It got quicker as everybody began chatting back and forth on IM.
At some point, IM took over, and then the central clearing took over—at that point, you no longer knew who your counterparty was because your counterparty was the clearing bank. Everything was anonymous, and it seemed like there were several years where that was kind of a loss. And then, all of a sudden, tools like Twitter and other social media came about.
Kara: How do those tools play into your current role or your current function as a trader? Are they just superficially helpful, or do they offer something tangible?
Brynne: There’s an amazing ability to share information out there today, whereas before you were very dependent on Bloomberg, for example. That was where everything was coming from; now, that shell is being cracked a little bit. Bloomberg is a great product, but there are just so many more people that are willing to find the information themselves and put it out there.
But as a result, there’s a lot of misinformation as well. You have to know what you’re looking for and know what you’re being marketed. It’s the age of short sound bites and headlines. I think general headlines can move the market.
Initially, there was nothing online, and everything was manual. All that’s happening now is information distribution being done more quickly. Headlines are getting out there faster. And because they’re getting out there faster, now people are competing to have their headline read versus someone else’s. There are some great groups of people on social—for example, Twitter—who are actually very similar in experience and background and very interested in networking. The goal is to find people who are legitimate.
Never, until I left Millennium, could I use social media. It’s not allowed. It’s blocked at most companies. So you end up with a lot of the information on social media being maybe not as credible sometimes, because it’s not coming from the people at BP, Shell or Exxon. They’re not tweeting information out.
Kara: They can’t.
Brynne: Yeah, it’s not possible. So you can find good information—if you know what you’re looking for. I liken it to a trading floor. Sitting on a trading floor, when people did everything over voice boxes, you’d hear it when something was happening—the sound told you that something was going on in the markets. Now it seems like there’s a lot of use of social media to recreate that kind of virtual trading floor.
Nowadays, you don’t necessarily know whom you’re “sitting next to,” so you’ve got to really curate your “trading room.” That’s how I think of it—as a trading room, where I can talk to people just as I would shout across to somebody. But keep in mind that it’s not something that people generally can use at most firms, so there’s a heavier weight towards journalists and more ordinary people versus the head of Goldman. It’s more weighted towards buzzwords and taglines.
When I first had a chance to use Twitter, I just thought, “I’m going to show up and put some facts out there—kind of dump out my brain.” I wasn’t seeing that anywhere—there’s a lack of that type of information. And I’ve created some really neat relationships through that.
I have always been really disciplined in putting information together, specifically price information. But not just for futures. For a given population—for example, if we’re talking about natural gas basis—I want to know what’s going on under the hood.
With natural gas, it’s not useful for me to read that a bunch of people are saying, “Oh, it’s going to be really cold this winter!” Or to just see the power burns or some of the fundamentals that people put out there as general statements about an asset class. I always lift up the hood and go to price data. Price data exists all over the place. I think people don’t kick the tires enough.
Kara: How do you stay relevant in an increasingly automated trading world given that sometimes it can just be “hit the button?” As a trader, how do you stay competitive?
Brynne: I would say the answer to that question lies in what you’re trying to do as a trader. If you are day trading or prop trading, for example, you should be worried about that because technology is advancing at light speeds. You aren’t going to have an edge if you’re sitting at home—your edge in the technology world is better technology. If you can’t invest in that, then you should find a different edge in trading.
If your edge is swing trading—I think that’s what they call it; I call it taking a position and taking risk, but I think it seems like in the equity or prop world, they call it “swing,” which means you hold it for a little bit longer—then you’re not trying to beat another orderer to a dark pool. You’ve thoroughly thought out, for example, a seasonal spread in something. It would be no different than if they thought, “I’m going to go long IBM and short Intel.”
Let’s say you were taking a long-short position in equities. You don’t need technology to do that. You need to be confident in your analysis skills. You need to make sure that you’ve covered all your bases. And ultimately, you make a decision, and you say, “I think one relative to the other—this is where it’s going to go.”
It’s not going to go where you want it to go the minute you put it on. You did some research, and you know that over time, you put that spread on and it’s going to play out. You don’t need to be worried about executing technology. It’s the same thing if you’re buying July versus September natural gas. I mean, it’s why TT is so great at building those autospreaders.
Basically, if your goal is to analyze a relationship or evaluation and then take a position, then you don’t need to worry about your technology being cutting-edge. If your goal is to figure out how you’re going to point and click faster, or know if there are icebergs or dark pools, then you should probably go work for a company that’s spending a lot of money on that.
If you’re very interested in energy, you should probably go work for an energy desk somewhere—a merchant desk—and come up through those ranks and learn about that area. I think you have to know what it is you’re trying to get out of it.
Kara: From more of a macro view, what do you think is the next frontier in trading?
Brynne: Over the last ten years, there’s been such an excitement around the opportunity to access markets more rapidly and about the ability to correlate more things and execute on those correlations. So a lot of money has been focused on that aspect of trading. The technology—making it quicker.
It used to be on trading desks, we’d hire the better weather guy—someone who used to work on a pipeline—because he could give us the 411 on the information that was coming in. And now, they want to have people who are more inclined to psychology and math, who can interpret data better.
I think we’re going to reach a point where we have a lack of depth, and we’ll have people in the business who provide liquidity in off-hub markets. There will probably be some sort of huge volatility or price event in that area that will bring money back to it.
If you think about—let’s just take a common one—the WTI Brent spread. No one is very interested in investing in ships when it costs three dollars. I’m just using general numbers. If that spread blows out again, you might see a whole lot of investment come back into that. Or the evolution of what the indexes are within the energy market. I think we’re going to see change and development now that energy markets in the U.S. are getting more and more global. There’s going to be an evolution of benchmarks that I think will create a lot of opportunities, just as there were in the beginning.
Kara: So you didn’t have really any trading experience on the floor—has that resulted in any advantages or disadvantages throughout your career?
Brynne: I certainly always used floor brokers. I’ve been to the floor. The floor operations in the beginning were very key to any desk. I think it’s just another component of the business. When I talk about trading, the whole business of trading, that’s one of the businesses within it. It is execution, liquidity.
I suppose, coming up in the energy world, the floor didn’t play as big a role because most contracts and products that you were trading were not listed. But I think, as an aspect of the business, that it’s good to know how they work because that helps you understand the industry.
Kara: Gives you a full picture.
Brynne: Yeah. Although I’m just not sure it’s that relevant today. I think it’s actually a disadvantage to have come from the floor, in some ways, because you don’t see the whole business.
Kara: It’s really hard to make that transition for a lot of people. From the floor to screens.
Brynne: Well, it’s hard for any broker to make. To transact electricity, you have ICE or your voice broker. So most of the products, they’re not just listed types. There is an entire world of non-standard contracts that might evolve to being listed, but that are still delivered to you via a voice broker.
And they would have just as hard a time going from being someone curating markets and quoting them to people, to being the one making the decision. A broker gets his or her revenue from commission. And a trader gets his or her revenue from moves in the market. And it’s just two components. Not everybody can do both.
Kara: Before we wrap up, let’s return to the bigger picture of your career. It’s been a winding road. Is there anything you would change?
Brynne: The reason it’s such a long story about how I got into this business is because I wasn’t rushing it. I didn’t do it that way on purpose, but I’m glad I did it the way I did. Still, I probably could have made some better choices if I had had some mentors.
If you’re looking at trading and you’re interested in the concept, or there’s something about it you like, you have to realize that it is this vast set of businesses and industries. There are still voice brokers in energy—because what you see online is just listed products. There are hundreds of others that are trading, and brokers are getting calls all day long. Expose yourself to all the different paths and industries that are in this wide world of trading.
Kara: That’s good advice. Is there any other advice you would give to women who are looking to make it in trading today?
Brynne: Find a mentor. It’s really important. Don’t sweat the small stuff. And just immerse yourself in the business. Over my career, I found that there were lots of situations where I wasn’t included. But you can’t let that stuff be the reason that you don’t go into it.
I also always believed that if I was good, if I had the talent, I could do it. Don’t psych yourself out before you even start. I haven’t seen people who are talented not make it. What I’ve seen is that there aren’t enough women who try to get into trading because they’re intimidated initially. And if that’s your personality, then it’s probably not for you. But if you think it’s for you, it’s so fun—get a mentor and stay with it. Go out with everybody. Make yourself included.
Thank you to Brynne for sharing her unique career journey with us. If you’d like to get more of her insights, follow her on Twitter at @BrynneKKelly.