Lee Taylor began his career on the floor of the New York Mercantile Exchange (NYMEX) before moving on to start an electricity broking desk for Exco/RJM. In 2012, Lee and James McManus started Cornerstone Futures. They focus on providing a unique, best-in-class brokerage to their customers and leverage the industry-leading tools available on the TT® platform for execution. Through their use of TT Order Types, Autospreader® and the third-party algo providers available on TT, they have successfully built a thriving brokerage. Follow Lee on Twitter at @Bosox1105 and learn about his market calls in gas spreads and other energy products.
TT: What can you tell us about Cornerstone Futures?
Lee: Cornerstone Futures LLC, which was the brainchild of my partner Jamie McManus and me, was founded in 2012. We had a vision in which our brokerage firm could compete on a domestic and European basis due to our broking style. Our goal is to create a team atmosphere for our clients from our staff to ensure proper coverage no matter who answers the line. Since inception, we have drawn on what we know and focused specifically on energy swaps, options and futures. The majority of our business is in the petroleum complex. What makes us unique is our deep understanding of energy markets coupled with our years of experience. We are laser-focused on execution and the reliability of our markets and as a result have formed deep, lasting relationships with our customers. Our order flow comes from a combination of energy companies, banks, hedge funds and traditional market-makers. We are headquartered in Red Bank, NJ with satellite offices in Houston, Florida and London.
How have the trade execution tools provided by TT assisted you in developing your business?
Lee: We have begun to incorporate execution algos from TT as well as some outside algo providers, which are available on TT, over the last several years. This style of execution has been well received by certain clients. Typically, it is the client who is requesting this type of service and we are obviously eager to assist. Algos have been in demand for their defined execution capabilities. Clients know what they’re getting when their orders are executed using algo logic that they understand and there’s clear understanding of how their fills were generated. The TT platform is extremely user friendly whether we are using one of your algorithms like Autospreader or TT Order Types or you are accommodating an outside service.
How has this global pandemic affected your business and impacted your trading? Did you change location, i.e., go from an outside office to trading from home?
Lee: At the onset of March, conditions due to the pandemic began to change quickly on a daily and weekly basis. I recall that every day something drastic and inconceivable the week before would occur—professional leagues shutting down, schools closing, followed by state mandated quarantines. Fortunately, we had moved our offices out of New York City just 15 months prior. As a small firm, we were able to get our entire staff set up at home quickly once the stay-at-home orders went into place in the span of a weekend. Since the middle of March, we have all been working from home and have not experienced that many headaches. The reliability of companies such as Trading Technologies have created an environment where companies like ours could seamlessly transition to a remote environment. The CEO of a major financial institution said it best last week, “We have been able to acclimate to this new business model where we work from home, it’s not ideal but we have adapted; however, we are eager to return to the old norm.”
You talk a lot on social media about RBOB spreads. What can you tell us about the RBOB market? What’s so interesting about it and where is it going?
Lee: Cornerstone has a strong presence in U.S. gasoline markets. Refined gasoline is the most consumed petroleum product in the United States and accounts for over 40% of U.S. oil consumption. Therefore, we pay attention to the market signals provided by RBOB futures and spreads. The refinery crack spread between oil and finished products is particularly vulnerable to major shocks in market supply or demand and therefore many of our clients, including the major refiners, are active in those markets. Gasoline futures are so interesting because of their seasonal nature, quality differentials due to blending optimization and their ability to be easily transported. This makes for robust trading in location, time and quality spreads. There is a lot of uncertainty around the recovery of gasoline demand in the second half of 2020 and I expect gasoline spreads to remain volatile as a result
Do you have any particularly memorable market events you can share with us?
Lee: The price action during this pandemic has been one for the record books. I can recall others in the past that are just as memorable. In 2008, I was transitioning from the floor to upstairs. My last day on the New York Mercantile Exchange was when WTI was on its highs of $140+. By the time I started my next job, the market had collapsed into the low $40s. Even though I missed all the price action during the collapse, I was able to be involved during its slower recovery back above $100 during the early part of the last decade. I have been in the industry for enough time that I have experienced several “once in a lifetime” events across many commodities. Some of the most memorable were the first Iraq war, the City of Springfield credit debacle which rippled through the power industry, the 9/11 attacks and the Enron collapse to name a few. The main difference this time around is that technology today has enabled the industry as a whole and firms like Cornerstone to be better equipped to handle market chaos.