Five Minutes With James J. Johanik
Five Minutes with James J. Johanik
Jim Johanik is the chief marketing officer for TradeHelm, an offshoot of Greenline Financial Technologies that is a provider of institutional and proprietary algorithmic and correlation trading systems. Previously, Johanik was with LIFFE and the CME. He completed his undergraduate degree at Wheaton College in 1994 and began to pursue a master’s degree in mathematics. Johanik recently discussed his career and life with MarketsWiki senior editor/producer Christine Marie Nielsen.
Q: How did you get involved with the financial industry?
A: About a quarter of the way through the (master's) program three things happened: I became engaged to my wife Heidi; I had to determine how I was going to make money to support a family; and I received a phone call from some former Chicago Research and Trading traders who were looking for an options clerk in Eurodollars. The puzzle pieces came together quickly as I left school one day and the very next day I was standing between the options pit and the futures pit at the CME.
In 1998, as the Globex2 platform was being rolled out, I found my niche in the industry as a marketing manager at the CME. Here I felt like my career hit its stride as I straddled one foot on the business side and one foot on the technology side, attempting to bridge the gap between traders and the technology. In those days, I was not a popular person with my friends on floor.
In 2001, LIFFE called and I accepted a position at the London exchange, representing and rolling out LIFFE CONNECT in the U.S., a job I immensely enjoyed before making a significant life and career change recently.
Q: How did you come to have your job at TradeHelm?
A: I am a person of deep faith in Christ. I cannot say that this was the case all along, though. However, as my faith increased over the years, so also did my heart increase for others in the world. In late 2007, I decided to leave my position at LIFFE to pursue full-time Christian ministry with a talented musician, recording artist and dear friend, Michael Thompson. At this same time, another close friend, Braden Janowski, CEO of Greenline Financial Technologies, approached me about joining his firm. After several discussions about where I was headed in life, we worked it out such that I could operate on a full-time basis with the ministry while joining and leading Greenline.
In early 2008, we sold Greenline to MarketAxess Holdings and in turn spun off a portion of Greenline's intellectual property, ACtrader, a correlation and algorithmic trading platform. This technology formed the flagship product for the new company called TradeHelm, which we have begun marketing only quite recently.
Q: You do work with a charitable organization that reaches out to individuals in Botswana, Africa. What is the organization? What do you do for them? Why? How long have you been involved with the organization?
A: The organization is OneWay Ministries. OneWay does many things, from using our digital recording studio to develop domestic and global recording and educational resources to supporting a team of trained Batswana nationals who minister to 84 villages in one of the highest concentrations of HIV infection in the world. As we have witnessed the immense needs around the world, we have also witnessed how these needs fail to be largely made known.
In response, we have recently taken on a project that produces media that describes the world's needs through the prayers of people from all over the world. The project, Prayercast.com, was only launched a few weeks ago, but it is showing great signs of success and use from people all over the world. We have a big vision for this project - one which I am very excited to see materialize.
Q: You have a pilot's license? How many hours have you flown? Where?
A: Yes! I have about 250 flying hours over the past three years. I started flying for purely personal goal reasons, but it has evolved into so much more. Flying is a phenomenal discipline and teachable life metaphor to my four young boys.
Aside from the lesson utility, I have used my flying for ministry here in the states when meeting with people throughout the region and I have also flown in Botswana. There is nothing like dodging torrential rainstorms while flying over lion packs and herds of giraffe and elephants.
Q: You serve in the Futures Industry Association's Information Technology Division. According to what you've seen there, what is the biggest challenge facing the industry on the information technology front?
A: Where does one begin? For starters, data capacity and risk management, although a book can be written on the unmentioned others ...
The ever-increasing data flows coming from the many exchanges into trading systems that thrive on immediacy and require well-engineered solutions that deliver information efficiently. In some respects, it is a shame that such solutions cost so much. Start up firms either have to bear significant costs for efficient infrastructure that handles such a waterfall of data, and then process the data, or they have to deploy trading strategies that are not dependent on low levels of data latency and intense data processing. Such a phenomenon has the potential to create “Wal-Marts” out of the industry's participants, where only the largest firms - willing to invest millions in proprietary infrastructure in order to bulldoze millions of nickels - will survive. Come to think of it, this is precisely the trend TradeHelm is addressing through the development of cost-efficient, commercially available algorithmic trading products.
The other issue is risk management. Frankly, and let's face it, the system is broken. Pre-trade risk management is often waived for trading firms that go direct to exchange. For firms that operate through a clearing firm, the most that is enforced is a rudimentary level of fat finger and position limits. Technology solutions that manage risk at the front-end level are inconsistent from one front-end to another. Give-ups usually fly under the radar of all risk management altogether. I'm not suggesting that the sky is falling, but I am suggesting the emperor has no clothes.
I think the time is ripe for exchanges to implement risk management solutions at their level, through an API, which provide a consistent and fair degree of risk management to all market participants. Clearing firms could spend less time managing the array of technical solutions that administer such poor risk management tool and devote time to actually managing risk.
Q: What is the future for "black box" trading? Have the events of the last year or so made people more or less interested in using automated trading systems? Why?
A: It is true that there are less market participants and less overall volume traded - banks and hedge funds have had to reevaluate - but the number of firms trading in some form of an automated manner has increased. This difficult period did wonders for the rationalization of technologies and trading strategies, whittling down tactics and trading approaches that didn't stand a chance in the long run.
The last year's event also put pressure on what firm’s spend on technology. We've seen an increasing number of firms question their spend on proprietary systems and begin for the first time to see commercially available solutions that can replicate 90 percent of what they do today at a fraction of the cost. The key for many of these firms is to find a commercial product that can replicate what they do, but also differentiate their specific approach to trading the market algorithmically relative to other firms operating across the same technology.
Black box, gray box, or what ever shade you wish to assign it is here to stay. As the costs decrease, its use will increase.
We will see tremendous progress on the technology side as things evolve.
Q: What do you think has been the most meaningful event in the financial industry since you've become involved? Why?
A: There is no one specific event that comes to mind. However, what does come to mind are the many great people who make up this industry. When you shift your career like I did, going from the exchange side of the industry food chain to the vendor side of the food chain along with what I do in ministry, the people who stick by your side regardless of title, role or power are the ones in whom you cherish. It says a lot about a person when they treat you the same after all that once was you has been stripped away. Fortunately for me, most of the people in this great industry are truly first class.