George Hanley Reflects on Trading Career in Second Interview Segment of Open Outcry Traders History Project Interview

John Lothian

John Lothian

Executive Chairman and CEO

 

In the second part of the Open Outcry Traders History Project interview with veteran trader George Hanley for the MarketsWiki Education series, Hanley shares insights into his dynamic trading journey.

Hanley was trading every month of soybeans at the MidAm and he was one of the few people at the exchange who figured out how to trade the expiring contract and take delivery, if need be. He opened the necessary banking lines, and one time the last day before expiration, he bought the market limit down and sold it limit up because others were afraid to get caught and have to take delivery, he said.

In 1981, after a successful stretch on the MidAm, Hanley moved to New Orleans to trade on the New Orleans Rice and Cotton Exchange at the urging of its chairman, CC Odom. However, it was an expensive experience, as Hanley and other traders were caught in some rice spreads that cost him and them a lot of money. Hanley did enjoy himself in New Orleans, though, he said.

In 1982, Hanley returned to Chicago and was recruited to the CME by Ronnie Manaster to trade the new Eurodollar contract using a quarter of an IMM or a quarter of a full CME membership to trade Eurodollars and CDs.

In order to identify these quarter members from the full members, Hanley and the other traders, called “pumpkins,” were made to wear orange trading jackets.

This was Hanley’s first experience at the CME and his first experience at a primary market. He said the CME was a “pretty crooked place back then,” which concerned him.

But he taught himself to trade tandems: CD spreads versus Eurodollar spreads. This allowed him to make enough money to get a full IMM membership, so he could trade T-Bills, which was the much bigger trade at the time.

After looking around at what he was doing, making money, and thinking about who was on the other side of the trade, which was the firm Solomon Brothers, he decided he did not like his odds as much. Hanley decided to move back to the CBOT.

He acquired a GEM membership and traded in the bond room and his trading results were even better, he said. However, after getting a full CBOT membership he started trading in the soybean pit, then the corn pit.

A favorite memory of Hanley’s was the day Tom Neal came over to him while he was standing in the corn pit. Neal was one of the most successful traders at the exchange, and he asked the 27-year-old Hanley what he thought about the March-May corn spread.

Neal, when he was a young runner, ran orders for Hanley’s father, who told him to come see him when things become slow. During those times the elder Hanley explained how all the cash grain boards at the exchange worked. Neal called Hanley’s father one of the nicest, classiest guys at the exchange.

Hanley reflected on the story, saying, “That was the kind of place that the Board of Trade was. It was about family. It was about integrity. It was about relationships.”

Hanley’s journey to making real money bounced him from city to city, exchange to exchange and trading pit to trading pit. However, when the CFTC announced they were lifting the restrictions on commodity options and the CBOT opened the soybean option pit on Halloween in 1984, Hanley was there for the opening of trade. He would learn options trading from some former CBOE traders and quickly become the biggest trader in the soybean option pit to the point it became a problem.

He was starting to run into position limit violations. He said that since the statute of limitations has expired he can tell this story now, but he would have so many positions he would stuff extra ones into his brother’s account or other people’s accounts.

Hanley said he thinks he still holds the record for the most times violating the position limit rules – as many as nine times. As a result, he was called before the business conduct committee and its chairman, John Ruth. Ruth told him if he came before the committee again he would be suspended for six months, which would have been devastating to Hanley, who had option positions running out 15 months.

Hanley decided it was time to clone himself, to scale his trading. He started hiring friends, having them clerk for him, putting them on a badge and then backing their trading. That was the beginning of the Hanley Group in 1985.

Hanley Group would also expand with other operations too, including Blink Trading and Infinium Capital Management. Blink built the first electronic trading cross exchange spread engine. Hanley sold Blink Trading to Dan Tierney and Steve Schuler of GETCO in 2002. In a bad trade that cost Hanley millions, he took cash from GETCO over time rather than stock in GETCO when he sold them Blink.

For 10 to 15 years, Hanley Group was the largest agricultural option trader in the world, he said. There were 100 people at Hanley Group. However, another business Hanley spawned from his broker-dealer and Hanley Group capital was Infinium Capital Management, which probably had 265 people at its peak, he said. Hanley said he probably brought over 400 people into the business between the three companies over the years.

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