Monday, November 21, 2011

Chicago's decade of innovation: 1972-1982 (article)

It's amazing how most traders take the origin and development of various futures contracts for granted considering the ingenuity it took to launch them in first place.  Fortunately the FT's Chicago correspondent Hal Weitzman wrote the following article for the World Federation of Exchange's monthly magazine earlier this year which puts into focus the decade of 1972-82 when the financial futures were developed and launched in Chicago.  The article, Chicago's Decade of Innovation 1972-1982, is perfect for holiday week reading as it's short enough to condense the decade's achievements but long enough to properly explain the circumstances which lead to their creation.  From the introduction,

"Yet between 1972 and 1982, Chicago’s futures exchanges effectively created modern financial derivatives markets. In a decade-long burst of radical innovation, the Chicago Board of Trade and the Chicago Mercantile Exchange – its younger and smaller rival –introduced a string of new financial derivatives that completely transformed the city, its exchanges and the entire world of finance. Beginning with the creation of the International Monetary Market in 1972, followed by the birth of the Chicago Board Options Exchange in 1973, through the introduction of Government National Mortgage Association (“Ginnie Mae”) Mae futures in 1975, futures on US Treasury bills in 1976, US Treasury bond futures in 1977, Eurodollar futures in 1981 and capped by the creation of index-based derivatives and options on futures in 1982, this decade of innovation laid the foundation of modern finance. It marked a critical paradigm shift, opening up the world of derivatives to the power of trading financial instruments and making the broader financial world aware of the importance of derivatives."

Full article linked:
Chicago's decade of innovation: 1972-1982

Thursday, November 17, 2011

Reality weirder than fiction

After a guy rogue trades his way to destroying a CBOT clearing firm in 1992, what could possibly be the second act for him????

photo and story from

Run for mayor of Vancouver with his campaign based in the Occupy Vancouver tent city, noting that he's the only homeless candidate in the election.

Wednesday, November 16, 2011

CBOT hand signals guide from 1995

This 1995 guide to CBOT hand signals was published by the exchange and shows just prices and quantities.  I obtained it from the Library of Congress which was quite helpful in this and other research requests.  Sorry my scanner isn't that great and some signals are a bit faint. 


Monday, November 14, 2011

NY cocoa ring

This photo of the NY Cocoa Exchange is from an undated postcard but my guess is the 50s or 60s. 

Thursday, November 10, 2011

Gursky - Chicago Board of Trade

Andreas Gursky photographed various trading floors in the late 90s and some of the photos have reached, in my opinion, ridiculously high valuations.  Clearly I am in the wrong business when his "Chicago Board of Trade" photo was sold last year for $902,500 at above the high estimate range of 600,000 - 900,000

How that photo is justified to be valued at just under a million dollars completely blows my mind.  Perhaps this description complete w/English art wanker accent can help me understand:

Nope, I just don't get it.  Click on the "Lot Notes" tab below the photo in this link to read further on what mental masturbation the art world justifies itself on for further description of the photo. 

Art valuations are really the only thing that can make me, politically further to the Right than the Tea Party, wonder if some people do make too much money and taxes should be increased.

Tuesday, November 8, 2011

What I've learned (Esquire knockoff)

Esquire magazine has a column each month entitled What I've Learned and various 'famous' people share knowledge on what they've learned through the journey of life.  Most of those interviewed aren't that interesting or even ought to be looked at for advice (reality stars, actors, etc...) but there are some great interviews in the archives worth reading.  Anyways, here's what I've learned mostly from having worked in and around various trading pits from 1998 until 2005 when I left to go fully electronic.  Generally it scares me when people offer advice/knowledge but these are simply observations over the years.  Or perhaps it'd be better to knockoff the title of one of my favorite books, Ice-T's The Ice Opinion - Who Gives a Fuck?

- As an impressionable eighteen year old, I once read that there were more millionaires per square foot in the trading pits than anywhere else in the world and that no one lived more alive than traders, so that's where I went.  Now it's certainly not the case anymore and tough to say what the equivalent currently is.

- Traders who blow up once tend to blow up again.  Similar to guys who cheat on their wives, if they do it once they'll do it again as it's deeply rooted in their psychology.  Ironically, those who blow up tend to find new financial backing easier than those who fade slowly.  

- Successful veterans tend to be the most helpful and encouraging to those starting along the same path as they know how difficult it is.  It's failed old men who try to discourage younger upstarts from achieving what they could not.

- A trader's wife has to be 100% supportive of trading because either the marriage won't last or trading will likely fail so a choice must be made if there is that rift. 

- "Trader" is one of the most ambiguous words in the English language and my definition is pretty narrow.

- When I first interviewed w/the traders who hired me as their clerk and put me on the path to trading, one of the first things they mentioned was how they go about business, "it's better to do the right thing ethically and lose money than do the wrong thing ethically and make money."

- Optimal level of wealth is enough to do anything but not enough to do nothing.

- There's a lot of miserable rich people and in particular, good health is the truest form of wealth there is. 

- Anyone who is afraid to look dumb or unable to admit fault is dangerous cause it will eventually lead to a large meltdown. 

- In high school, I got into an on the job training program which earned me class credit along with minimum wage and was able to get on at a small brokerage doing clerk work.  One duty was to accept and record checks as they came in and often the big checks would come from rural Kansas farmers who'd walk them in.  The look of caution and ambivalence in their eye when handing over the check was so powerful that I knew that I'd never want to deal w/outside capital or clients in any business later on, it's just too much moral responsibility.

- Successful people are willing to do what unsuccessful people are unwilling to do, i.e. sacrifice their free time, work smart, stay out of trouble, reinvest in their business and themselves, put in the long hours, move cities or countries, trade a paycut for more opportunity elsewhere, delay gratification, etc...

- The amateur looks for the greatest reward, the professional looks for the least amount of risk. 

- I honestly think that no one before or since on the trading floor has ever been mentored by a greater group of guys than I learned about trading and life from.  Brings to mind the song which was played as "Lucky" Luc Robatille's number was retired by the LA Kings a few years ago, it was Lynyrd Skynyrd's "Lucky Man."

That's all I can hammer out at the moment but if anyone has any to add, feel free to put them in the comment section. 

MATIF photos

Fabien Danis was kind enough to share some photos of his days trading at MATIF in Paris during the 1990s.  Floor traders worldwide always had a joie de vivre that is unmatched in other industries and combined with how the French have mastered the art of living, it must've been incredibly fun to work on MATIF. 

Tuesday, November 1, 2011

A dedication to MF Global

I was going to post a bit more on the lessons since arriving in Chicago twelve years ago today but got a little boozed at dinner so best I can do is dedicate a song to MF Global.  Having spent my youth in Kansas around various small, independent businesses like gun shows and pawn shops I noticed there were a lot of colorful ways to ask for payment.  My dad's favorite was "In God We Trust, All Others Pay Cash" and my favorite was "Cash on the Barrelhead" so to the bankrupt clearing firm MF Global that has my funds frozen I dedicate this song to you:

"That'll be cash on the barrelhead son
Not part not half but the entire sum
No money down, no credit plan
Cause a little bird told me , you're a travellin' man"

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