Commentary

Matt Hodgson
Traders Magazine Online News

Data: From Big Chaotic to Smart Profitable

Matt Hodgson, CEO & Founder at Mosaic Smart Data discusses how FICC businesses armed with smart data are enabled to make the very best possible use of their data to derive more profitable business gains.

Traders Poll

Should the Order Protection Rule be revised or scrapped altogether?




Free Site Registration

Building Stronger Chapters

STA plans to use social media to expand its relationships with affiliate chapters

Since electing a new chief executive officer last year and completing a thorough review, the Security Traders Association has decided top-down policy changes and unwanted emails are not the most effective way to help traders.

Instead, the organization's affiliate chapters will be the primary way members interact with it, STA officials say.

As it looks to 2012, the STA wants to change the kinds of information it sends to members and the ways it communicates.

STA's approximately 4,200 members are overwhelmed with information every day. And members will pay more attention to the 26 local affiliates when it comes to deciding what's important.

Jennifer Setzenfand

Those were some of the comments in a recent wide-ranging interview with incoming chairman Jennifer Setzenfand and STA president and CEO James Toes.

"We've spent the last few years analyzing and evaluating everything," said Setzenfand, a senior trader with Federated Investors in Pittsburgh. She officially takes office in January.

Setzenfand will make STA history. She will become the first child of a chairman to follow in her parent's footsteps in the 77-year history of the organization.

STA officials decided over the last year that they need to communicate more effectively with members, who already hear from lots of different groups every day. They need to ensure that information sent from the national group to members isn't part of the daily noise every professional encounters, Setzenfand said. STA officials must ensure that information they consider critical to a trader doesn't end up in a member's junk mail folder.

How will the STA do that? 
Setzenfand said the group will use social media as one way of becoming a bigger part of members' lives.

"This is about embracing all the tools that are out there. It means using different messaging, different social media and different touch points to contact people," she said. Finding more effective ways to reach members is critical, she adds.

"The average person is so bombarded with information every day that you literally have only 10 seconds or so to grab someone's attention," she said.

Setzenfand says members should receive information fast, but only the kinds and in the amounts that are wanted. That means, she adds, the STA and its affiliates must do a better job of targeting their messages.

"The member should be able to say, 'That's the information I needed-thank you very much,' and move on," she said.

But improving how the STA provides information also means finding ways to segment it, she adds. The STA has various trading constituencies, and each has its own priorities, she says. That segmentation, STA officials say, must include better data management. It also means recognizing the different needs of affiliates and letting them directly interact with members.

"So, in situations which require a notification to all our members, STA will send these types of communiques to the affiliates for them to distribute," new CEO Toes said. "At the national office, we feel it is one of our responsibilities to provide product to the affiliates that they can pass on to their local members. By doing that, the members see an added value in belonging to their local affiliate."

STA officials also say this is part of finding ways to let members choose what issues are important to them. And they say that means having the chapters become the conduit of information coming from the national organization.

But the affiliates will also decide what kind of information matters. This will be key to ensuring that the appropriate information will reach the right member and that STA remains relevant to the average trader.

Providing large-trader reporting, STA officials say, will be an example of the new information-specific policy.

"So with the example of large-trader reporting, STA, in partnership with the Financial Information Forum, have put together a product which keeps members informed on this particular issue. We have used the affiliates to alert the members that such a distribution list was being formed," Toes said. "If members wished to receive information on this topic, they sent their contact information to the national office. In our position at the national office, we can leverage the strength of all the affiliates to obtain resources that individual affiliates cannot get, due to either the size of their membership of the limited internal resources they have."

He added: "And STA, in partnership with FIF, will be providing summary materials. If you want to receive information on this particular issue, please send a reply back with your contact information."

If it works, then STA officials say they will start building distribution lists around a particular issue. This will "empower the end user," Toes believes, and avoid plaguing members with superfluous emails.

Clearly, empowering the end user, if it works, would make the STA more vital and relevant to traders.

Toes concedes that in the past, the STA was sometimes guilty of distributing information that might be too broad or sometimes provided it to members with little interest in a subject. The goal now, he says, is doing a better job of matching up information with the right members.

How?

Let members have more say about what they want.

"What we feel is that people want to have more control of what information is coming at them," Toes said. "So what we don't want to do is send information to people if it is not applicable to their day-to-day responsibilities, and then they have a negative opinion of the affiliate or the STA."

Setzenfand agrees. "If you're not interested in a topic, then we don't want to be in front of you all the time," she said.

What other topics will they address using these targeted information emails? 

STA officials say they will see how the large-trader issue works out and examine other possible topics.

However, Setzenfand also says she can see another role for this information-specific policy. Members always want to know more about pending new rules. And before STA can supply more targeted information, it must have updated information. It intends to be a stronger player in the entire rules process, especially the last part of the process, according to STA officials.

"First, there's the concept release where the SEC seeks comments. Second is the rules proposal process, where they ask for comment on the specific rule," Setzenfand said.

"Then the last step is the implementation process, where the rules are implemented in the marketplace. We've always been active in the first two steps. But in the third, we feel our regulators and members need more help from us. We want this to be an area of growth for us," she said.

For example, the trading industry is closely watching the development of last year's Dodd-Frank Wall Street Reform and Consumer Protection Act. The law has to be translated into rules by regulators, but regulators are behind schedule in writing new rules, getting them reviewed and implemented.

"We're in a 'hurry up and wait' mode. Only about 10 percent of the rules from Dodd-Frank have been written," she said.

Here, if the STA and its affiliates can communicate and bring together coalitions that will lobby effectively, the group could become a more important organization, STA officials hope. That is, if the STA is an important player in the rule-making process.

For instance, in looking ahead to her year as chairman, Setzenfand notes that STA expects to have a say as the Securities and Exchange Commission contemplates a plan to address extraordinary volatility, which is pursuant to rule 608 of Regulation NMS.

The plan covers vital areas for members, including clearly erroneous transactions and order-handling rules, with amendments to trading practices likely to be passed. The plan has been created for and by members of the exchanges. The plan includes an advisory committee, but the STA now doesn't believe committee membership is diverse enough.

"The Plan Oversight Committee," the STA wrote in a recent letter to the SEC, "does not include representation of a broad spectrum of market participants. The STA recommends instituting a structure and procedures that would include representatives from a diverse universe of market participants and a means to enact revisions to the Plan as situations or conditions warrant," read a letter earlier this year from Toes and current STA chairman Joseph Cangemi.

The STA is also asking the SEC to let it participate in an advisory committee on other issues, such as limit up/limit down. Earlier this year, the SEC announced that the national securities exchanges and the Financial Industry Regulatory Authority had filed a proposal to establish a new "limit up/limit down mechanism to address extreme market volatility in U.S equity markets. Under the plan, trades in listed stocks would have to be executed within a range tied to recent prices for the security." Again, the STA wants to be part of the entire process.

The issue for Setzenfand and her colleagues is whether a more organized STA can persuade regulators to give the group a better hearing at the same time that it becomes more relevant to members. 

This means that if Setzenfand and her colleagues succeed, the STA will become more important in Washington as well as on Main Street.