This is part two of a two-part video interview JLN did with Gedon Hertshten, the founder of G.H. Financials, for the Open Outcry Traders History series.
Gedon Hertshten had his share of ups and downs during his long trading career. He told the story of having an open position and not getting out of it in time. He said Ray Cahnman was trading in the same pit with him, in Treasuries.
“He had access to the cash market in the early ’80s and most of us didn’t. We all had to go to Ray after the bell to get out. He was happy to let you out, but he used to screw you completely. Many times I looked at the screen where the cash market was, and I saw the price I was supposed to get if I sold, but the price was much higher, and he was making me a market way below that, and he knew I had no choice.”
Hertschten did that several times and took his losses. One day he decided he didn’t want to do that anymore and decided that if he had a position at the end of the day, he would go home with the position.
“Sure enough I went home with a position and it went against me the next day. But I insisted on no more giving up. Eventually if I had a position, which didn’t happen too often, I would just carry it myself. I could afford to carry the position overnight.”
Hertshten said his relationship with the brokers was an important one.
“You have to be fair with the brokers and you have to help them out. That means if a broker sold to you by mistake and then he was supposed to buy, you try to help him out. And sometimes he found a way to return the favor.”
Hertshten also said he had a good rapport with the other locals. Sometimes there were arguments, “but overall we got along very well, all of us,” he said.
Hertshten said he did witness some illegal practices on the floor.
“There was a broker who used to have his girlfriend helping him,” he said. “And a lot of the orders he would not put out into the open outcry pit, he would hold onto the orders and just cross with her – she also had a broker’s license. We all saw it, but he was a big broker in the back months, so nobody wanted to fight. He had a temper.”
Hertshten eventually got fed up with this broker and with no one calling him out on his behavior, and ended up taking the matter to the exchange’s office of investigation, and then, when they didn’t act, he took it to the newly formed CFTC.
The young lawyers there were hungry for something to do. He told one of them about the broker, and “he called everyone else in and they were so excited that here is this Board of Trade member who came to talk to them,” he said. The CFTC went to the exchange and asked for all the details of the trades.
“Then the exchange’s office of investigation approached me and said, ‘Why did you go to the CFTC?’ I said, ‘I gave you a chance and you didn’t do it,'” Hertshten said. “‘So I had to go to the CFTC.'”
The exchange eventually ended up suspending the broker for five years.
Hertshten also talked about his experiences on the CME board and on the board of LIFFE.
“Part of the reason I wanted to be in the CME was that this industry changed my life completely and I would love to see this industry grow and to give the same opportunity I got 44 years ago to young people. In the pits, you depend only on your own abilities, not connections,” he said.
When he came to the CME, he had traded in London and Singapore and had experienced many different exchanges. “To me the CME was only Chicago,” he said. “I was the only one who had spent time outside Chicago. So I thought I could contribute to the CME with my knowledge of different cultures and international markets.”
He was on the board of LIFFE when it went all-electronic. Early on, he said, the board debated about whether members should get a better commission than customers after they went electronic.
“And LIFFE was the exchange that decided that customers and members would pay the same fees, which by the way in Chicago was different,” Hertshten said. “It was a very good decision, because the exchange was better that way.”
Asked if he ever made history, Hertshten said he was the one who first developed trading in the emerging markets. “I was the first one in India, the first in Israel. I went to India because of talent, not to save money. I recruited from top universities and taught them trading,” he said.
Hertshten said the life lesson he learned from being a trader was that in order to be successful in life you don’t have to be perfect.
“You don’t have to be right all the time,” he said. “100% in trading doesn’t exist. It’s the same in life.”