Every day, product analyst Louis-Philippe Hemond lives and breathes the
jargon of the futures and options market. It's the home of grains, oils and
financial instruments and the people who trade them.
"It's a challenging field," says Hemond. "But then everything in finance
for me has been challenging in the last 10 years."
Hemond didn't come to the financial market from the usual route. An arts
major in university, he decided the business world might be a better place
for him than the world of communications. Smack in the middle of a recession,
he landed a job at a brokerage firm. Eventually, Hemond moved to stock exchanges.
The challenge of the market never stops. "It's fascinating to find new
initiatives that are going to be traded tomorrow, [wondering] who will be
the customer and who will be the user," he says.
Hemond launched a new product on the exchange to deal with the yield curve
-- a financial situation that can reduce profits. Called the Yield Curve Spread
Futures and Options, Hemond hopes it will get rid of the risk involved in
yield curves and eventually become an industry standard.
"You're trying to anticipate the need, and that means you have to learn
fast," he says.
Accurate anticipation is tough, admits Leon Bitton, director of research
and product development for a stock exchange.
"It can be work that's very frustrating because only two out of 10 products
are succeeding," he says. "You really have to accept the failure. If a person
is just in this for success, it's tough."
Part of the challenge is that derivative products are now in their second
generation. When the derivatives were new, it was easier to put together successful
packages. The next 10 years will be much more difficult.
"It's exciting, but you really have a broad picture to look at. You don't
get to focus on a specific field. It's like any other research and development
field -- you need to be up to date and do a lot of reading," says Bitton.
Try projecting what will happen as a result of deregulating electricity.
"That's a field that up until recently has been fully regulated by the government
-- both in Canada and the United States," he says.
"A market analyst must be aware that the deregulation process
is taking place and ask, what does that mean? The government used to fix the
price. Now there must be a need for some type of risk management tool. And
that's when risk and options come into play."
While some may think predicting the future is about as scientific as looking
into a crystal ball, market analysts know better. Analysts find products that
aren't only good from a risk management point of view, but are also easy to
explain to the user.
"The challenge is to find and structure products that are being standardized
in the exchange environment where more and more people can use it," says Bitton.
Lisa Struckmeyer, a product manager at the Chicago Board of Trade, says
there's no question this is a fast-paced field.
Despite that, she loves her job. "It's a dynamic industry and financial
derivatives are really becoming more and more complex. It's fun to keep on
top of it."