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By Witliam Falloon

I n the world of futures ond options trading, ChicagoI is the focal point of many Horatio Alger stories.I Rumors and tales of what such traders as Richard

(SIMEX) has clearly imported "Chicago-style" tradingand made it work.

With it have come new stories and new mystiques

-particularly in the Far East's version of "pin-stripedpork bellies," the Nikkei 225 stock index future.Deregulation in Jopan has motivated Nomuro, Daiwa,Nikko, and Yamoichi, along with U.S. securities houses,to quickly sumound the pit with booths, and averagedollar value of daily trading has surged to over $150million. Arbitrage is now going on between the Osaka 50stock future and the Nikkei, and increased institutionalparticipation means that new volume records are setalmost weekly.

Still, ftttle is known in the U.S. about this pit, whiclttrodes a contract more volatile than the S&P 50O futures

, Dennis, Tbm Baldwin, and Rick Barnes have done in aday (or a career) in the market are legendary. And so arethe mystiques behind such money-making empires as

,E!;:,1:;r:esearch & rtading GRT and the o'connor

.' While these stories age gracefully, and in large part

.are tue, the growth of futures and options exchanges

.gvgrseas has allowed more than a growing market share: of volume orii ipio interest to iove oulside Chicago.:.'-The "local" now adds as much color to many ofihe.overseas exchanges. Perhaps more so than any other,:,th€ Singapore International Monetary Exchange

51

INTERVIEW

contract. Four of its most successfultraders are Loh Sui Hian, Phong KaiHuat, Yew Soi Khoon, and an Ameri-can, Steven A. Schoenfeld. Accord-ing to a reliable source, these fourtraders have pulled as much as $Imillion from the Nikkei pit since itstarted trading in September 1986.

Each of them hod his own uniquebeginning. Phang, a Malaysian citi-zen, formerly worked on offshore oilrigs and became tired of the hoursand pay of a manual loborer. Hedescribes himself as a trader whotrades on "the feel of the pit," withone eye on the paper flow from suchheavyweights as Nomura and Daiwa.

The 32-year-old Yew wos equallyutired" after working for o few yearsin a manufacturing line as an engi-neer for General Electric. He decidedto look around for o chollenge anddiscovered the SIMEX.

ft wssn't easy. Tfading the Deut-schemark and Japanese yen, Yew lostheovily in o year and a half beforeswitching to the Nikkei pit. The riseof the Japanese stock market allowedhim to dig himself out of a hole, andthe volatility of the contract madehim more comfortoble positioning inthe pit. A hordened trader, he hasearned a reputation of being able totrude the contract's "big swings" of400 to 1000 points in a day.

Loh and Schoenfeld, on the otherhand, came to the pit with intellectualbackgrounds. The 24-year-oldSchoenfeld, a Fulbright Scholor inEconomics from Clark University inWorcester, Mass., first mode his wayover to Singapore to study the devel-opment of Far Eastern futures mor-kets last year and to work as o part-time journalist. He is to the Nikkei pitwhat journalist George Plimpton wasin a Detroit Lion or New York Yankeeuniform-o foreigner in a foreignmarket. Borrowing $16,000 to trade,he quickly turned his enthusiasm intoan understanding of the nuances ofthe Japanese equity market and FarEastern culture. Profits and a tradingadvisory firm-Lion Pacific Invest-ment Pty. Ltd.-came with time.

Finally, Loh is reported to be themost successful of them all. A gradu-ate of Columbia University withan MBA and o Bachelorb degree infuonomics, he shuns fundamentalanalysis because "there is no woy thatI can compete with a Nomura orDaiwa on a fundamentol level." He

sticks to daytrading, using point andfigure and bar charts in the pit. Herarely goes home with a position atnight, and is well known for bottompicking and skillfully timing longpositions when the market is over-sold.

Interviewed on July 16, Schoen-

feld out lined important developmentstaking place within the Nikkei pit,facts U.S. institutions should knowabout how the contract trodes, andhis perceptions of liquidity. Inter-viewed on July 23, Loh, Phang, andYew talk about a Far Eastern locol'sdifficulty with taking o loss, the Jap-anese, and their most successful daysof trading in the pit.

INTERMARKET: How did you endup as an American at SIMEX?SCHOENFELD: I went to Asia tostudy in general the development ofAsiazPacific financial futures mar-kets. I picked Singapore as the basebecause of the link with the Merc,because it had an English-speakinguniversity, and because SIMEX wasand still is the farthest along in thepath to growth as a full-fledgedfutures market.

INTERMARKET: :'Are you stillattending the university there?

SCHOENFELD: I was doing gradu-ate work and research work in theSchool of Management at theNational University of Singapore.Midway through I switched myresearch to the Institute of SoutheastAsian Studies, which is a think tankrun in cooperation with the Associa-tion of Southeast Asian Nations(ASEAN). By then I was alreadystarting my involvement withSIMEX, so I did the first futures-related research there

I came home in spring of 1986 toborrow some money to trade. While Iwas home, I decided to do the floororientation program at the Mercinstead of SIMEX. I thought thatafter being at the Merc, the SIMEXpits would be less intimidating.

I stopped in Tokyo on mY wayback to learn more about the JaPa-nese markets. All along my intentionwas to trade the Nikkei. I thought ithad the most potential as a contractfor locals, and from an intellectualstandpoint, it was most intriguingbecause I knew how large the JaPa-nese stock market had become, that ithad no hedging mechanism, that itwas tremendously overvalued, andthat it had a history of volatility. AIIthat led me to believe that it would bea good contract.

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INTERVIEWINTERMARKET: How much didyou start trading with?SCHOENFELD: $16.000.

INTERMARKET: What,s been yoursugcess on your investment?SCHOENFELD: At this point, Idon't like to talk about it is a iealreturn on investment because it is mylivelihood. It's not like you pui$15,000 into an account and it comesout as more money. But not includinemy original investment, I have madiover $100,000.

INTERMARKET: That's fantasticfor an American trading in a foreignmarket.SCHOENFELD: Some of it has to dowith my timing as far as the currencvgoes. The Nikkei is priced in yen, soevery time you make money or losemoney for that matter, you are alsomaking currency market decisionsand can convert to your home curren-cy-in my case U.S. dollars.

Through the fall and winter anduntil April this year, I was keepingmost of my trading profits in myaccount in yen. Only when the yenbroke 140.00 did I start converting itlike gangbusters to U.S. dollars. Mvtiming was pretty good and probablyrncreasecl my returns by llVo. It wasreally a matter of discipline.

INTERMARKET: So you mademoney in the Nikkei right from thestart?SCHOENFELD: In the beginning, itwas very difficult because you couldcall the market right and still bewrong because of the illiquidity. youcould call the cash markit and see aturn beginning, but by then all theoffers would be lifted and voucouldn't turn, or vice versa. iouygyld usually end up by scratching orraKrng a loss on the trade.

- Any of the people who survivedthe beginning of the Nikkei werePretty much toughened. We wereused to seeing the extent of the vola-

Yew Soi Khoon

December, and January, it was meand one or two other traders in thepit. I still recall times when it was iustme in the pit playing with a quotemachine by myself complaining thecurrencies were active and no one wastrading the Nikkei. But I had com-mitted myself to the conrracr-men-tally and financially.

INTERMARKET: And now?SCHOENFELD: Now it is anotherstory. It is definitely the most popu-Iar contract in terms of the numbei oflocals. Eurodollar futures still dotwice as much volume or more, but aIot of it is institutions trading hun-dred lots with each other or big localsdoing the spreads.

Without a doubr, the Nikkei pit isnow the most populated. The lastcount that I got was 90 locals in thepit. We just moved to a bigger pit onJune 22, and it is working out well.

It is about the size of the Swissfranc or Deutschemark pit at theMerc, or perhaps the Japanese yenpit. At first it wasn't full and wasunevenly populated. Nomura nowhas the front booth on the oppositeside of the pit whereas previouslythere had been no booths manned.Now there is a very even flow dis-tributed around the pit.

INTERMARKET. Mr. yew, youdidn't always trade the Nikkei, did you?

YEW: I started trading the Nikkeiwhen it was first launched and havenever looked back.

I traded for I 12 years in the cur-rencies and Treasury bonds duringChicago hours and had no moneyafterwards. I was really down. Myturnaround came when the SIMEXstarted to trade the Nikkei. I gotinterested in trading and started overagain.

INTERMARKET: And what did youchange about your style to becomesuccessful?YEW: Before, I was trading curren-cies, the Deutschemark and the Japa-nese yen. There wasn't much vola-tility and liquidity at the time, so theywere very difficult for a trader in thepit to trade. I stopped trading othercontracts to concentrate on theNikkei. I like big market swings. Mystyle of trading works well in thesetypes of markets. That is what youfind in the Nikkei. Slowly I madeback all of my money.

INTERMARKET: Does SIMEX stillhave the incentive program theyoffered locals in the beginning?SCHOENFEI;D: No. Since theexchange sold out the last of the ini-tial seats [450], they dropped theinstallment plan. One incentive thatstill remains is that if vou trade acertain volume a month, they willrebate your clearing fees. The numberof trades that you have to do yourfirst year remains the same, but afterthe first year they expect you to domore volume if you are going toreceive the clearing rebates.

There is still a tax incentive. Andthat will remain in force in the fore-seeable future. If a local forms anapproved company, which is a com:pany under a certain tax statutedesigned for SIMEX trades, andtrades through this companyaccount, he is taxed at only 1090. Thatapplies in any futures exchange

-London, Sydney, Chicago, any-where that you trade.

INTERMARKET: How are youtrading the markets'!

"SCHOENFELD: I've always by mynature preferred to be a day trader,something of a position trader, andan overnight trader too. I'm veryaggressive at the close and willing to

tility but not being able to profit fromthe full extent of the movi. Once thePit became more active, it was easyfor us, because we were used to arotten situation and it had becomebetter.

In September and October lastYjat, it was active but volume wasdefinitely dwindling. By November,

WARKETJJ

INTERVIEW

hold overnight positions. During theday, I am usually looking to spot thetrend. I usually bome into the daY

holding an overnight position, andwill be making a decision to hold mYposition, lighten it, or increase it. Itall depends how heavy I come into themarket.

Usually during the daY there willbe one trend change. The market, forexample, may shoot uP in the first 45

minutes, but then lose momentum. Itmay not have a fall, but will start todribble down. So I may cover some. Imay wait for things to bottom outbefore establishing the size of mYposition. Or if things really go down,I'll cover and go short.

One of the things I've been work-ing on with an associate of mine at theInstitute of Southeast Asian Studiesis the first position trading system forthe Nikkei futures. No one else that Iknow has this kind of sYstem. Wehave been developing it over the lastnine months, have three Years oftracking, and one year of trackingwith the Nikkei. I use it to keep posi-tions running.

Once I have a longer-term positionrunning, I try to forget it and focuson my own daily trading activity inthe market in front of me. I don'thave to think about the long term.Before, I was acting as a day traderand as a position trader on the floor,which is sort of contradictory.

INTERMARKET: How do each ofyou day trade?LOH: It may sound crazy for aneconomist to say this, but I trade ona technical basis. The majority of thetime I am strictly a day trader. I maytake a longer-term position if I see

something significant happen in themarket. I keep a point and figurechart going in the pit, and use barcharts. When I go into the pit, I alsoknow precisely the price support andresistance levels.PHANG: I basically trade on the feel-ing in the pit, and watch what thecash market is doing very closely. Asthe cash market turns upward, I canbuy. You can see some wild swings.YEW: I use a mixture of technicaland fundamentals to trade. I try totake positions when both confirm aposition that I want to take.SCHOENFELD: If there are scalpingopportunities, I am going to takethem. That's why I'm there. Other-

wise I might as well be upstairs. I alsolike to trade the closes, because usu-ally there will be something big.

Five minutes after TokYo closes

-and in the 15 minutes extra beforewe close -there will usually be a shortcovering rally or some heavy profittaking. I like to focus some of mY

bigger trades at that time, becausemost locals are covering for the nextday. A lot of locals may be lighteningup, or something else, and that usu-ally can affect the market.

INTERMARKET: What off-floorbusiness has made its way to SIMEX?Do you see portfolio insurers, indexarbitrage, or hedgers coming to themarket?SCHOENFELD: Before the JaPa-

nese were officially allowed to trade

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for Tokyo [May 23], we saw a steadyincrease in their business. At firstthey were a little bit reluctant,because they weren't sure which waytheir regulators were going to go. Sothey certainly weren't trading the vol-ume we expected them to.

Around February, we saw a lotmore activity from Nomura andDaiwa. From Nikko, I saw some ofthe first program-related trading.Whether they were buying or sellingfor their index funds, or testing somekind of arbitrage, it was apparent thatit wasn't just pure spec or hedgetrades.

Nikko would come into the marketwhen we were at a steep discount orpremium, and there would be asteady selling or steady buying untilthat premium had come into somenormal relationship, even if it thenwent back. It was definitely premium

related trading on their Part.

INTERMARKET: Can you tell if theJapanese houses are trading for them-selves or customers?LOH: As far as Nomura and manY ofthe houses are concerned, I think theyare trading for themselves in a largeway. But manY orders from otherhouses appear to be for customers,and I would say that makes uP the

majority.

INTERMARKET: What about theU.S. securities houses?SCHOENFELD: With thc U.S.houses, it is difficult to figure outwho is behind their trades. There is atleast one -probablY two or three

-very big institutional players out ofAsia who are going through theAmerican houses and camouflagingtheir trades.

There was a lot of sPeculation inthe pit as to who these clients were.

On the floor, we have seen some bigpositions initiated bY one house,added to and liquidated bY a second,and liquidated through a third' Asmuch as I can tell, this is still goingon. This client started through Shear-son Lehman, switched to Daiwa,switched to SecPac, and now spreads

trades diversely. Because the pit was

very small, especially in the begin-ning, and people are very aware of bigposition sizes, it was probably a verysmart move. I resPect the trader ortraders who were behind it.

INTERMARKET: What size Posi-tions?SCHOENFELD: It started inNovember with this one big client.This was after the Nikkei had had abig correction and we were seeing

some steep discounts. He would comeinto the market and just sit there witha bid all day.'He was building uPpositions of 1000 contracts, big posi-

tions then because open interest at thetime was only about 3000 contracts.He was not arguing about Price, and

as it turned out, he was right, becausewe were at a 400 to 500 point discountin November at the 1?,000 level, andyou know where the market is now.This was something that had a signifi-cant impact on the market.

We saw this customer establishinglongs the whole ride uP. Not bverY-

body noticed it, but he was sellingthrough another house while he was

I NTE R M A R KET /Sebtember 1 9 8 7

keeping the buying pressure on fromthe house we were expecting the buy-ing pressure from, thus keeping abullish sentiment in the pit while tak-ing big profits.

I'm sure he had to run into some ofthe air pockets we ran into in March,April, and May, but he certainly gotout of a few of them well before theywould hurt, and then was establishinghimself at the bottom.

INTERMARKET: Did you find ahigh mortality rate among localswhen this was happening?SCHOENFELD: It was toughbecause SIMEX itself was new. Thereare always new locals coming in. A lotof them who tried to start with theNikkei got burned quickly because itis really volatile. They took some biglosses. You have to be on your toes.You can't be stubborn with Nikkeilosses.

INTERMARKET: What would youcompare it to?SCHOENFELD: The only contractyou could really compare it to is theS&P 500. But in percentage termmoyes, and absolute term moves, it isstill more volatile-without a doubt.

More than that, you are also deal-ing with a less liquid market, whichadds to the volatility and the dangerbecause it is tougher psychologicallyto cut a loss 50 points away than onlyfive or 10.

In the Nikkei, if the price breaksup or down, it will usually go 50 to100 points before you even have thecourage or guts to get out of yourposition, whereas when it breaks inthe S&P, it is usually steady. It can gofast. But the time between when vou

an up and down, up and down con-tract. It can move 1000 points in aday. It can move on average about400 points each way in a day, which isabove $7000 in U.S. terms. There arebig streaks.PHANG: We have had days wherethe market has gone down 1000points and up 900 points, all in thesame day. Just yesterday, it went up200 points, and then came down 700points, and then came up 400 points,and down again 300 points. Even on

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quiet days, we are seeing 300- to400-point swings.

INTERMARKET: With the vola-tility and liquidity you are talkingabout, is it realistic for portfolioinsurers and other risk managers totry to use the market?SCHOENFELD: I think they are. Ifyou look at open interest, it is touch-ing 7000. That should be enough indollar or yen terms. Put it this way, a500-lot position can insure a lot ofJapanese equity, and prior to the lastfew months and the entry of the Japa-nese, a 500-lot order would benoticed: It would move the market.The locals could pick it off.

If you are willing to establish posi-tions over the course of the day, orgingerly over two days, there is noproblem with establishing a 500-lot'position. Of course, it will take timeand if you reveal your cards and over-play the market, you will get a worseprice. But it can be and is being done.LOII: I have talked to Nomura. Andthey have told me that they have cli-ents that are now doing arbitrage.They say they have been very suc-cessful. I also know some otherhouses that say that portfolio manag-ers from the U.K., Hong Kong, andeven the U.S. are using the contract

for other reasons.PHANG: We have seen 500 carsbeing traded. The key is to do it in 100lots so that it is done most efficiently.YEW: What the large Japanesehouses are doing is offering at thesame level as the spot market. Theykeep offering at those prices. If themarket really crashes, they have donea lot of orders at a high level. Whatthey will do is sell in an up market.They will have 500 cars, offered at26,500. Although it may look likethey are getting hurt, if the marketcrashes, they will have trades exe-cuted at very high levels. There arequite a number of houses that dothis-Daiwa, Drexel, Nomura, and soon. When the market keeps comingdown, they buy all the way up, Theywould buy all the way to the level of26,000.

INTERMARKET: Who are the bestbrokers at disguising trades?SCHOENFELD: There are two waysto look at it. It is not just a matter ofdisguising, but also good execution.We don't always know what is goingon behind the scenes, because theorder may just be a give-up fromSecPac to Drexel, or something likethat. We may see Drexel and we thinkit's them.

But usually we can tell. If Shearsongives up a trade to SecPac, when wecheck the trade, they have to give usShearson's clearing number. We haveseen some Japanese go through this.

The Japanese are corporate non-clearing members, so their tradeshave to go through a clearing mem-ber. As far as execution skills,Nomura is at the top. They have enor-mous power but they don't abuse it.They are very straightforward, andthat's honorable. They are taking along-term view, keeping the marketshealthy. They know that if they arefair with us, the locals will be fairwith them. Nomura has order flowson both sides. They can be in themarket with both bids and offers,whereas others are just buyers or sell-ers. They have a nice balance.

Even if they are executing a heavybuy order for a client or the house,they still have sell orders. They won'tcross it right away. If they have aclient that wants to get out rightaway, often they will make a marketfor him. Plenty of other houses willdo it very quickly, crossing without

s.ay, "OK, I've got to cut my loss,'and do it, it will only go two or threeticks. It can be four or five or tenticks with the Nikkei.

For a big trader, it is a more formi-dable market because it is more pain-ful to cut your losses. The movei arebigger. If you cut your losses at 100points below, of course it hurts. ButYPu can usually go short and makeYour money back if you are not stub-Dorn.

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-[IiTERMARKET: Do ail of youagree with Steve?

fOH: Y_es, if you are trading five to|ur:ars [contracts] and can g6t on the

.right track, you cin make m-oney. It's

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INTERVIEW

giving the locals a chance. Nomurawill make a call -slowly and loudlythree times -so that some locals cantake a part if they want. They havevery professional staff.

With the American houses, itdepends who is the order filler atwhich time. Continental Illinois is oneof the more active in the pit. They usea combination of their own staff andlocals. They are professional.

INTERMARKITT: You always hearof the two days in September last year[llth and l2th] and one day in Janu-ary [23rd] with the S&p 500. Whatabout in the Nikkei?SCHOENFELD: April 27 and 28were by far the wildest days, withouta doubt. On the 27th,the Nikkei hov-ered in the morning and lost 800points in the afternoon. In the morn-ing on the 28th, it continued with a1000-point drop in the first 45 min-utes. It was one of the wildest thingsI've seen in my life. It was a1300-point decline from the 23,400level to 22,100, so we are talkingabout a very large percentage move.It started a recovery in the late morn-ing, and then dropped back.

INTERMARKET: A move of 2000points in the futures?SCHOENFELD: Yes, in two ses-sions. We call it two sessions. Ourmarket never closes, but the Japanesehave two trading sessions, one in themorning, one in the afternoon. So inessentially one Tokyo afternoon andrnorning, it dropped 2800 points. Thefutures started at the 24,200level and

the low the next morning was 22,1C0.The futures had an even greater movebecause the premium came out in lit-erally three hours of trading.

INTERMARKET: What causedthat?SCHOENFELD: (Laughs) The buy-ers disappeared. It was right beforeone of the golden week Japanese holi-days, where there are a series of holi-days. The Japanese turn it into a weekoff. So the Japanese are like anygood people, they like to take profitsbefore holidays so they can enjoythemselves. They didn't realize howoverbought their market was.

Essentially, the powers that be inthe Japanese market let it happenbecause the market was fluffy. It waspure panic selling by institutions. Wein the futures market watched thecontract at a premium. Needless tosay when a contract is dropping 20points in a flash, you are going to see

that premium disappear very quickly.We went straight into a discount. Thefutures market always leads the cashmarket. We are always leading it intothe turns, and in the re_bounds, so wewere way ahead of the cash on theway down. The minute the breakstarted, the premium came out. Weclosed that first day back at a pre-mium, so we tracked the move prettymuch tick for tick. I was lucky to beshort most of that time.

But by the second day, the day itfell 1000 points, it was already 500points off and I was already begin-ning to say it was ridiculous. So Istarted buying, cutting losses, buy-ing, cutting losses, trying to bottomPick.

Eventually what happened withthe contract, because there are a lotof smart players, was that the cashcontinued falling but the futuresstopped. We had been doing a bigdiscount and were slowly movingback to par and then to a slight pre-,mium. At that point I stopped worry-ing about cutting losses and startedbuying. As soon as the cash stopped,it didn't even have to turn yet, and thefutures started rallying. It was rightback up like a rubber band, 800points. We closed that day only down200 points, after being down 1200 inthe futures, 1000 points for the index.I made more money on the long side.It was my best d1y at SIMEX.

INTERI\{ARKET: . . . Casualties onthe floor?SCHOENFELD: A lot of people, thenew ones, were cautious. But therewere casualties. For the ones who gotout at 200 ticks, you could still makeit all back. But there were some peo-ple caught in the markets on thewrong side both ways.

,A 1000-point move is one half mil-lion yen, which is about $3500 percontract. So if you were short fivecontracts, which is common for expe-rienced locals, you lost $17,000. Butno one caught the whole move.

All told, I made well in excess of$20,000 that day. That was generallycatching only one good chunk of themove in small size, and a smaller partin big size.

INTERMARKET: Where were youguys on April27 and 28? What wereyour most successful days?LOH: I cannot remember any spe-cific days. My best days usually hap-pen when the market is oversold, andI buy it. This can happen when thediscount is as deep as 700 points andthe cash market starts to turn. Thecash market starts moving, and usu-ally we get wild swings. It can move as

much as 1000 points. That's usuallyhow I like to trade.PHANG: My best day came abouttwo months ago. The market hit thehigh of the day and I was on thewrong side, so I cut my loss. Onelarge trader failed to meet a margincall and there was a forced liquida-tion on the floor. The market camedown very rapidly then. I covered allmy shorts, and then got long. The

56 I NTE RMA R K ET / Scbtctnbn 1 98 7 f ^t1

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INIERVITW

INTERMARKET: How does a U.S.trader even begin to try to trade aforeign contract on a foreienexchange? Is it realistic to trv?SCHOENFELD: I believe so. Itdepends what hours you work. Ifyouare a technical trader off the fl'oortrading bonds or S&ps, there is noreason you can't stay up with yourQuotron or Reuters monitor, chartthe thing, and trade it. In a sense. Ithink it is much easier, since it ismuch more trendy than the currenciesand the bonds.

.. .T!. Nikkei usually has very estab_Iished trends during the day. Nothingis as easy as it sounds. Iiut I trulibelieve that position traders can trv.We know that the trend has prer;ymuch been one way until recently.

In the middle of June, we saw avery serious correction. Some of theprops holding up the Japanese mar_ket have been removed. If the dollaris stabilized really, then the Japaneselose of lot of their motivation to beafraid of U.S. equities and U.S.bonds. One reason that the Japanesemarket was up was that the Japanesefelt trapped. They were afriid tomove^their money into foreign mar_kets for fear of losing on currencymoves.

_ If the dollar is stabilized, one ofthe reasons for remaining' in--th"domestic market is removed. That isyhv this is going to be a very excitingtime for the Nikkei because the fun_damentals are changing. Not that theIunclamextals really ever meant any_tiing in Japan, at least corporate fun_damentals, but one of the chief rea_sons for Japanese cash going intoqomestic markets with no concern forfundamentals, shall we say, is gone.

INTERMARKET: Steve, how did INTERMARKET: what is differentil:::g::il. yourself about the under- aUout their chaitin c;.?"--tytng stock market? srlrnrNrtirn. r1^,, ..^^ --.L^1 :_rvru5, rLUUK marKetT SCHOENFELD: They use what isScHOENFELD: Spending hard catieo a candre chart. It-ii #; -;,e13eo

yen in Tokyo. In Juni, before describe. It is a bar chart-cororedLttl:l:-g:t SIMEX, I spent rwo weeks btack if it is a down duvl una white ifllJllqr *".tine' n.6ar.,' ;;;:^" ;il; ;;:il."il'i,"i,l;,Tl#il1!ii:'::"^:: ,11 ffih1l-9..: I learned by wayof tearningthemirkets. Notthat

,,ofTo.'j' . r';ilJiftd Jii*'i'ii i;l#,:ffii:i lff ;Hiffi: rTllHthat,I.believed abour ttre poteniial oi a iriena f.; To[i; runJ tn.- to,n,'tne-Nikkei and SIMEX. ;;" dev rr wqc s.nmerhina la ranL ar:.-'v r\rArer anq JrMEx every day. It was something to look atD":.j0,.::,^-**' -9'e weeks in t"-ri.-li' i"J;; ;;*" dirrerenr,

;,199.mb-e1 and November after trad- uecauie-i irri rr,.Jr'*."rrr" charrsl8lhe Nikkei, and I knew the ques,- they use in Tokyo.

If I behaved like a local in Chi-cago, I wouldn't have half the friendsthat I do in Singapore, and it,s notlikely I would get all the trades I do.You have to swallow your pride andlearn about Asian attiiudes inexpressing emotions. In Chicago, it ispart of your day to curse someone outin the pit, in front of everyone else.You can't do that at SIMEX. It hap-pens, but problems are solved inmuch more of a group way,

Big problems are usually taken outof the pit. It is the Asian concept offace, saving face or losing face. Topublicly insult someone will makethem lose face. I have learned to con.trol my temper. It is quite interestingin the pit, because you see manyAsians breaking their society's rulesabout facg becairse they can't help it.It gets emotional in the pit. So it's alearning experience for them too, aunique social experiment.

INTERMARKET: And what aboutfrom the non-American point ofview?LOH: Well, you see a lot of differentreactions in the pit. Some guys arevery polite. When the markets eethot, you do see pushing and rushingin the pit like you do in the States.Compared to Chicago, though, weare not as forceful in the pit. peoplesay that when they come to theexchange.

In general, Chicago traders tend tocut losses more quickly. I used to havea tendency to restrict myself from cut-ting my losses so quickly because ofthe concept of "face saving," It wasembarrassing for me to reveal to therest of the traders in the pit that I wastaking a loss. I looked stupid to all ofmy fellow traders. But pretty soon itstafted to really hurt my pocketbook,so I learned to express myself veryquickly (Laughs).PHANG: It was hard to get used to atfirst. But the more people laugh at mein the pit, the better I seem to trade.IM

market rebounded. I made lots ofmoney.

tions to ask. I spent time in dealinsrooms, securities houses, watchin!the action from a Tokyo perspectivelI learned their mindset, how thevthink about the markets. It coulihave been very dangerous if I hadn'tdone that.

Coming from the States, if I hadbeen j.udging the Japanese market byAmerican standards, I could havebeen calling it overvalued and tryingto- short it like many fund managers.Many American and foreign lund

On lhe conceplof soving fqce:

"ll wqsembqrrqssing forme lo reveql lolhe resl of the

lrqders in the pitlhql I wqs toking

q loss.tt

managers wefe trying to call the tops.They were net sellers through tlisfour-month rally fiom November. Icould have gotten hurt. I could havesaid that P,zE ratios are 70 and wouldhave killed myself shorting.

I also bothered to learn about theircharting methods and made somecontacts. I don't rely on contacts formy daily trading, but if I'm in a vervconfused state of the market aniwhere it is heading, I'm not one whohesitates to call someone in Tokvo tohear what they have to say.

It also helped remind me that I wasa foreigner in a foreign market, andto keep an open mind. That'i the keyfor me as an American to work in thatmarket. I am trading a Japanese indexand I'm a foreigner in the pit. I amgne of very few foreigners. Everyonethat I work with is Asian, 95v/i areChinese.