When Doug Engmann, chairman of Sage Brokerage Holdings, chose to expand his business to other exchanges, it was the late Jack Wing, Chairman Emeritus of Chicago Corporation, who helped him make the decision.
Sage, unlike other clearing firms at the time, Engmann said, offered both real-time clearing and real-time risk management that allowed clients to easily check their positions despite the West Coast time zone. Wing — then Chicago Corporation CEO — convinced Engmann “that Sage would have success on the Cboe.” Employing real-time strategies to check positions gave Sage an advantage. “None of the other clear firms could do that, and we were still doing that when we were at the Cboe. It helped grow our business significantly again,” according to Engmann.
Yet it wasn’t long before Engmann’s time on the trading floor and as a market maker came to an end. After the stock market crash on Oct. 19,1987 — also known as Black Monday — he said that the paper dried up and he was busy with other things. “If it had been busier on the floor, I would have stayed on the floor,” Engmann said. He gave up his market-maker badge and began to trade through a broker. After over a decade of trading on the floor, it was a challenge to give up his routine — and it is something that he misses to this day.
“I’d go on the floor to give an order to my broker, and another broker would come in, and I’d say ‘half bid.’ And he’d write up a ticket, and my broker would come over and he would say, ‘You’re not a market maker anymore, you can’t do that,’” Engmann said.
Engmann served on the board of the National Securities Clearing Corporation, and Options Clearing Corporation. The 1987 crash unveiled issues in the clearing and settlement systems that he wanted to solve through his time as a board member. He initiated the hedge system, which he says solved the issue of “long options, in short stock,” where “There was no credit given to the short stock.” According to Engmann, “They may not seem very important to guys on the floor or gals on the floor, but they were important to making sure that the machinery worked, in the right sort of way, and we didn’t run into any problems.”
Feeling the pressures of operating a large options market maker clearing firm, Engmann realized that the only way to survive was to have the backing of a bank. In 1995, the investment banking company ABN Amro bought the Chicago Corporation, but his friend and colleague Jack Wing’s time in the business after the acquisition was short-lived. “Now I was chairman of ABN Emerald Sage, and I reported to Jack. And of course, Jack decided to quit three months later, and so I was all alone in the ABN Emerald world,” said Engmann. Initially, his days with ABN went well. He led the organization’s global futures clearing and prime brokerage business, from 2000-2004. “I couldn’t take it anymore. … So I ended up selling the clearing business to Merrill Lynch,” he said.
Engmann was also the head of North American Equities for Fimat/Newedge USA from 2005 to 2008. When working with Fimat, Engmann had pioneered the concept of portfolio margining.
Portfolio margining is defined as a measure of “margins/performance bonds based on the largest potential loss found by valuing the portfolio over a range of underlying prices and volatilities,” according to MarketsWiki. “The point is for margin requirements to more accurately reflect the actual risk of the positions in an account,” the site added.
The result of the concept was so successful that according to Engmann, “We became known as the pioneers and I’m pretty proud of what we were able to do, [with] portfolio margin. it was a great innovation in the industry. It was fun promoting it at that time.”
In 2008, Fimat merged with Calyon Financial in what Engman says was “one of the most disastrous mergers I’ve ever seen.” When asked why he decided to retire, he said that “it just was too difficult to see them screw up the firm.” Engmann retired shortly after and launched Revere Data LLC, an information technology and services company where he served as co-chairman from 2000-2013.