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

Author:Leo Melamed [Melamed, Leo]
Language: eng
Format: epub
Tags: Business & Economics, Personal Finance, Investing, General
ISBN: 9780857197498
Google: Us4nEAAAQBAJ
Publisher: Harriman House Limited
Published: 2021-04-27T00:08:48.643522+00:00

Behind the scenes

Creation of the IOM division had a side story. Jack Sandner and I had been in pursuit of William Brodsky for the position of CME executive VP. I felt we needed someone with stock market expertise to help us in the equity asset class we were entering. It was a difficult decision for Brodsky, since he knew little about futures and even less about us. Besides, we were the second city and New York, well, you know the answer. He was well regarded there as an executive of the American Stock Exchange and clearly would have had a very successful reign there. But as Brodsky later told me, “The fact that you could raise several million dollars over a weekend by creating a new division convinced me to take your offer and come to Chicago.”

Brodsky was the perfect choice for us. He was instrumental in solving some of the intricate issues which arose from trying to coordinate our futures instrument with the securities traded in New York. He negotiated and instituted the settlement procedure for the so-called ‘triple witching day’ (the convergence of cash, futures and option prices). This linkage feature removed the risk of ending the coupled transactions at different values at the close of the contract. Linkage also created index arbitrage, a market procedure that kept futures prices more or less in line with the underlying cash-index price. It was key in the success of the S&P contract.

It was an easy choice to promote Bill Brodsky to take Clayton Yeutter’s post as CME president. Indeed, Brodsky’s move to Chicago turned out to be a blessing both for Chicago and his career. He parlayed his formidable talents to later become the outstanding chairman of the CBOE, the options exchange created by the CBOT, a post from which he recently retired.

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