Michael Donahue, managing director of TransMarket Group

Taming the Tiger

How did TransMarket Group develop into the global trading operation it is today?

We started out in 1981 as a market-making and broking operation at the CBOT (Chicago Board of Trade), but within a few years we started operations in London to trade on LIFFE. As well as our long-term presence in New York and Sydney, we’ve more recently opened offices in Madrid (2003), Mumbai (2004) and Singapore (2006) and now have just shy of 200 traders. We were originally a floor-based trading firm with futures exchange memberships in Chicago, London and Sydney, but when the markets started going fully electronic in 1998-9, we expanded trading to Eurex, Intercontinental Exchange (ICE), Singapore and others. Our overall trading strategy is what I would describe as ‘loose-form arbitrage’. We’re not interested in buying a COMEX-listed gold contract and selling CBOT-listed gold against it, for example, because those kinds of trades tend to be fully arbed out. There’s very little opportunity to capture any kind of incremental profits, although it’s a different matter when these contracts are traded in Asia overnight and volumes are thinner. Instead, we tend to focus on cross-market spreads where there’s demonstrable correlation.

Why and how did you establish trading operations in Singapore?

We see a lot of potential in Asia and chose Singapore over Hong Kong or Tokyo for a variety of reasons. First, Singapore is a lot more orientated toward listed futures and options than the other locations, but also cost of business is lower and finding highly qualified IT professionals is relatively easy. A key factor was the decision by CME (Chicago Mercantile Exchange), CBOT, Eurex and LIFFE to locate their Asian hubs here. That means we have direct gateways to the big four as well as ICE and the Singapore and Sydney futures exchanges, which already all have hubs here, as well as connections to Brokertec and eSpeed. We also have good access to many other Asian exchanges because our clearer, FIMAT, has located its infrastructure for Asian futures and options trading in Singapore. We plug directly into that infrastructure to trade with seven exchanges across Asia. Via the CME’s Globex platform we also have access to NYMEX (New York Mercantile Exchange) and COMEX (New York Commodities Exchange). Within the next year hopefully the Chinese markets will open up and we’ll have access to the Shanghai and Dalian futures exchanges.

We’re always interested in being among the first participants as any new market opens up, so we’re using Singapore to identify opportunities in the Asian markets. Singapore is also a good location because it is more or less equidistant between Mumbai, where we have a team of 50, and the Chinese markets. ...

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