Contents - Index

 Applied to the FTS Global Equities Case: International Diversification Support

Markets Open in Global Equities:   

US 30 Dow Jones Industrial Index (DJIA) Stocks trading in USD on the US Exchanges.

STOXX 50 European stocks trading in Euros on the European exchanges

ASX 50 Australian stocks trading in AUD on the Australian Stock Exchange

Base currency for Global position:  USD

Initial screen:

Mac Users:  see appendix (same applies to any case)

Windows Users:   Launch the FTS Real Time Trader Client from the System Manager:

And Login with your pre-assigned trading name and password by first selecting the case you are running.

There are four major components to the FTS Real Time Client Screen: 

·         Market Microstructure

·         Web Support

·         Interactive Analytics

·         Reports 

An introduction to each component is provided below in relation to the Global Equities case.  The same introduction applies to any exercise using the FTS Real Time Trading Client.

A.       Market Microstructure (Mac Users see appendix):

A comprehensive set of trades are permitted.  These trades range from Cash, Margin and Short trades, Limit, Stop and Trailing Stop orders.  To access the first three types click on the ticker of the security you want to trade in the floating quote window (e.g., AEND-FRA). 

The bottom left side of the screen now changes to the trade window:

To access the limit and stop orders first click on the top menu items:  Limit and Stop Orders:

The following floating window then pops up: (You must first click on List All Tickers to get the complete list of securities):

B.      Interactive Analytical Support (Bottom RHS of Trading Screen)

First, the FTS real time trader provides a real time report of your global position both in their local currencies as well as the overall position in the designated base currency (in this case USD).  This is revealed in the middle of the LHS of the main trading screen.  An example is the following:

To get at the position you must first take a position and then in the box beside Global above (off the screen) select “All.”

You can then drill down to more detailed analytical support using the bottom RHS of the main trading screen where the default is “Global” and the current spot exchange rates.

Click beside Global to see each specific currency – the dropdown will have US Dollar, Euro and AUD for this current case.  First select USD to see the default support:

Similarly, if you select Euro from the drop down then the equivalent analytical support is available for your European stock position:

This allows you to compare risk and return exposures across stocks with different functional currencies.

Updating Parameters:

However, the Real Time FTS Trading Client is a tool that is designed to be worked with.  As a result, you are encouraged to enter the results of your own analysis into the analytical support.  For example, suppose you assess beta to be different than the default beta provided.   In the above the default beta for ALSTOM S.A. is 1.44 and the beta estimated from your web support is 1.33.  Does this affect Markowitz diversification?

To address this question let us enter our personal estimate for beta as follows:

Step 1:  Select Parameters from the menu item and then click on List All and select the security you want to adjust:

Then select beta from the Parameter type dropdown:

And then enter 1.33 in the text box and click on Submit Value.  Finally to use your estimate for beta check the checkbox “Use these values in my analytical support”

Once you have done this your screen will appear as:

Finally, in the Euro support you will now see:

No Short sales Markowitz weight has now changed to .3368 from 0 when beta is 1.33 versus 1.44!

The above short exercise reveals one criticism that practitioners level against Markowitz diversification, that it is overly sensitive to the estimates for variances and co-variances such that it generates portfolios that “intuitively are undiversified.”  This provides an interesting question to discuss further.

C.      Web Support:

By clicking on any of the tickers in the floating Quote window you will bring up the web support associated with each security.  For example, clicking on the ticker  AEND-FRA from the floating window below:

Brings up the following web support:  (Aside this support also contains estimates of beta that were used in the previous section).

By clicking on the text at the top of the above screen (e.g., Big Charts, Forecasts, Ratios) provides immediate access to both technicals and fundamentals for the security you have selected.  For example, clicking on BigCharts and selecting Interactive Charts provides immediate access to an interactive chart:

D.      Reports (For Mac Users see the appendix)

A comprehensive set of reports are available from the “Reports” menu.

By selecting Reports you can then access the current performance report for the whole group (relative values) or you can access personal reports.  Each report is controlled from the menus and dropdowns and numerical properties of the report you can export to Excel.  In fact you can export to Excel your entire database history (select All History in the screen dump below) and export this to Excel.  This lets you create any report you want beyond the standard set supported in the drop down illustrated below.

The above represents a quick tour of some of the main components of the Global Equities case screen.

Appendix:  Mac Users (and Windows Users)

Step 1:  Launch the FTS Real Time Trader Client directly from the web site (either www.ftsmodules.com or www.ftstnet.com).  You then click on “The FTS Real Time Client (SL Version) to run this. 

Note:   If you have to first install Silverlight from the Microsoft site you will need to first install, then close the browser to ftsmodules or ftsnet and then re-open the browser and re-run by clicking on The FTS Real Time Client (SL Version):

Step 2:  Select your trading case and enter your pre-assigned Trading Name and password into the following screen:

Trading in the Silverlight Version:  Market Microstructure

There are two ways of trading for Mac Users

Method 1:  In the quote window part of the screen you can click directly on a ticker and then you will see Order Type, Quantity as above appear.  You then use the drop down to select order type, enter your quantity in the Quantity text box and then click Submit to trade.

Method 2:  In the bottom LHS of the screen you can select either the Market Order or Limit Order tabs.

Position Information is via currency in the top left hand part of the screen:

Here from the drop down menu items select the currency and security class that you want to view starting from your global market value position:

Then select say USD, Stocks as below:

Analytical Support

A full set of analytical support is available in the Mac version in the center part of the trading screen.

Again this is completely interactive.  You can change default parameters with your own personal inputs.

Example:

Example:  Suppose from the above screen to change Beta for Disney when using the CAPM Index Model support.  From the US Dollar dropdown at top select Walt Disney:

Now check the check box above that says:  “Use in Analytics”

And then from the screen below select Index Model (CAPM) and now your beta (1.10) has replaced the FTS default Disney beta in this support system:

Reports

A comprehensive set of reports are available in the Mac version.  Although a single click export to Excel feature is currently unavailable in Silverlight you can achieve the same result in two steps as follows:

Consider the screen below:

Below US Dollar on the LHS the current positions in Stocks is selected.  Then in the middle part of the screen the Reports Tab was clicked on, American Express Co. selected from the dropdown and then P&L Report selected from the dropdown beside this.

Step 1:  To export this screen or (any other screen report such as Performance Measures in bottom middle above) you first click on a cell inside the grid that you want to export to Excel or Word and then use the key board to enter:  Ctrl C  -- this will automatically copy the grid contents to a text area of the FTS Real Time Trading Client. 

Step 2:  To see the text area click on the tab Copy (see above top LHS).  Doing this reveals the following:

Now you can then copy and paste in the normal way from this special screen to either Word, Excel or whatever other application you are using.  Finally to get back to the Trader screen click on the tab Trader (top LHS above).