Leo Melamed - Man of the Futures: The Story of Leo Melamed and the Birth of Modern Finance

T he phenomenal success of financial futures exemplified the power of an idea whose time had come. The financial revolution I describe blazed the trail for much of what has since followed in world capital markets. It established that there was a need for a new genre of risk management instruments responsive to investment applications and modern telecommunications. It led to the acceptance and integration of futures and options within the infrastructure of the financial establishment. It became the catalyst for the development of financial futures and derivatives worldwide. And, according to Nobel laureate Merton Miller, it introduced the modern era of finance.

In time, I became a singular voice with the foresight to recognize the gargantuan force of coming technology, as well as its ability to trample everything standing in its way. As I courageously told members in 1987:

Anyone who has not seen the handwriting on the wall is blind to the reality of our times. One can no more deny the fact that technology has and will continue to engulf every aspect of financial markets than one can restrict the use of futures in the management of risk. The markets of the future will be automated. The traders of the future will trade by way of the screen. Those who dare to ignore this reality face extinction.

I took it upon myself to revolutionize the 1,000-year-old open outcry transaction process and replace it with the magic of Globexthe CMEs electronic transaction system.

What I did not set out to do was to make gobs of money. Dont get me wrong. As a trader I always wanted to make winning trades, but that was never the priority in my life. In first place was the drive to leave a mark, to make a difference, to deserve a word or two in history. The Chicago Mercantile Exchange (CME), once the Butter and Egg Board and later the house that pork bellies built, is today known as the house that innovation builtor, as most would say, the house that Leo built. As in most great endeavors, it must be underscored that without the countless devoted and talented people at my side, to whom I am eternally grateful and who I name wherever possible, this result could not have been achieved.

Needless to say, financial derivatives and futures also come with attendant risks and dangers. They are highly sophisticated tools. If used for illicit purposes, or applied in a negligent manner, they can become a causal factor for disastrous results, as the financial breakdown of 2008 demonstrated. Nevertheless, their successful application and efficiency continue to give them an indispensable role in todays trading and risk-management ecosystem.

I confess that some of the recollections in this book have been described in my other books: Leo Melamed on the Markets , Escape to the Futures , and For Crying Out Loud . Why, then, write another book? The answer is simple. My previous memoirs were published in 1996. It was far too early to provide an in-depth assessment of what I had accomplished. So much has happened to markets since then that my achievements take on a much deeper understanding from the perspective of history.

Additionally, Man of the Futures contains a host of events and episodes that I have never shared before. It also is companion to a unique set of photographs taken over the span of five decades. Man of the Futures affords me the chance to delve deeper into past events and assess everything with the benefit of hindsight. In this manner, it represents a rare opportunity to evaluate my original rationale, examine my prognostications and offer a peak into the future.

Sam and I are friends. The fact we both ended up in Chicago is a rare coincidence. Although Sam was born in the US and I in Poland, Chicago was the resting stop for our respective parents, who separately escaped from Poland at the outset of the second world war, they from Sosnowiec, us from Bialystok. Both sets of parents followed the same escape route from Vilnius, Lithuania with a transit visa from one of the worlds righteousJapanese counsel general to Lithuania, Chiune Sugihara. Sam once wrote that as a result of that miraculous escape, he grew up believing that anything is possible.