Good Derivatives: A Story of Financial and Environmental Innovation

Chapter 25

Good Derivatives

The Best Has Yet to Come

Chicago will give you a chance. The sporting spirit is the spirit of Chicago.

—Lincoln Steffens

This book has been a personal story of my past four decades of financial innovation in Chicago, London, Paris, Mumbai, and Beijing. I've learned a lot from these successes, and more from the failures. This story follows my transformation from an academic in a period of social unrest into a practitioner during a time of cataclysmic change in the futures industry. It then chronicles my experience as an entrepreneur. The times changed, and I had to change with them.

The year 1970 serves as the starting point because it marked the beginning of my professional interest in organized futures markets. The natural bookend is 2010, the year I sold the Chicago Climate Exchange PLC. We conclude with a review of the past, lessons learned, and some thoughts about the next 40 years.

The Past 40 Years

This has been a story about LaSalle Street, not Wall Street. Over the last 40 years, the geographic expansion of financial innovation from the Midwest has been astonishing. In a short span of time, financial futures have taken over the reins of commodity trading. We have also witnessed a drastic transformation in the structure of exchanges, geographic expansion, products diversity, trading platforms and futures regulatory framework.

In 1970, futures trading in the United States reached a record level of 13.7 million contracts. Corn, wheat, and soybean ...