Rand holds mystique because the company was founded through the purchase of Gerald Futures by hedge fund legend Monroe Trout. (The name was changed to Rand, as in Ayn Rand, the controversial author of Atlas Shrugged and The Fountain-head.) Commodity Futures Trading Commission approved the Rand model as the only FCM owned by a fund, despite some industry opposition.
"We were a real curiosity because of Monroe Trout," says Michael Manning, Rand's president and ceo. "There was some controversy about Rand becoming a firm, but that turned out to be good publicity." Trout brought in industry veterans such as Manning and Dennis Zarr, who is senior vp and director of business development.
During the first years, Zarr targeted overseas banks and institutions from Europe, the Middle East and Asia. He says that luring US and overseas customers was difficult, but its executives' experience quickly became a valuable proposition.
"We were able to help them with managed futures, put products together, guide them to lawyers and the right accountants," Zarr explains. "When they had a problem, they'd call us and it had noth-ing to do with execution and clearing."
Technology
Experience counts, but cutting-edge technology carries an FCM and its customers. "We felt strongly that what an institution really needs is an accurate statement," says Manning. "As easy as that sounds, there are a lot of firms that can't seem to do it. That's the single biggest problem for an FCM and we make those problems go away."
Rand's clearing system interfaces with customer back office systems and matches Rand's trade information with customer data several times per day.
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Last year, Rand upgraded its front-end trading solution, RandConnect, which is powered by Patsystems. Rand Connect presents an opportunity to reach retail customers, a previously untapped market.
"Prior to the advent of electronic trading and our ability to control our risk through systematic risk con-trols, retail business was not one of our target markets," Manning comments. "We now think we can manage that risk and in working through introducing brokers and non-clearing FCM's we have gained tremendous retail growth."
Rand also maintains a balance of agriculture and financial clients, notes Mike Pontarelli, senior vp and chief operations officer: "We have a mix of financial business and grain business, so we do very well when the grains are active. But we also have other business to support what we do overall when grains are inactive."
Kottke & Associates, a Rand client since 1993, says Rand has built a reputation of doing it right. "I think they are a top line company and that view is certainly shared by others in the industry," explains Neal Kottke, president of Kottke in Chicago. "Rand has been very clear in what it wanted to do, which is to provide a clearing service. And they have people that know the floors and know their business."
Even as more firms partake in the consolidation trend, Manning says that Rand should continue to grow on its own. "There's good and bad," he observes, looking forward. "The bad news is that there is always a risk we'll be dwarfed by our larger competitors, who offer prime brokerage services we cannot match. But we make up for that with the day-in and day-out accuracy and access to all major markets. And when you become a customer, we try to build a two-way relationship, so that we can add value to you and your business".