Gilbert Leistner – Open Outcry Traders History Project – Part Three

John Lothian

John Lothian

Executive Chairman and CEO

In part three of his interview with John Lothian News for the Open Outcry Traders History Project, veteran trader and educator Gilbert Leistner says the only thing he saw in his years of trading that spontaneously stopped trading was the Challenger space shuttle blowing up. The floor went silent for 30 seconds and it was two minutes before he heard his first tasteless joke, he said.

He spoke about market openings and how the difference in styles of rotational opening or all at once presented different opportunities. 

Leistner spoke about his strategy of how he worked the brokers, though he did not like the implication of the word “work,” he said.

Leistner said one of the most famous open outcry trading scammers used to work for him: Darryl Zimmerman, a cattle trader. After Zimmerman left Leistner’s program he went out on his own and tried to corner the Treasury Bond market with kited checks, Leistner said. This was the episode that caused great harm to Lee Stern and forced his firm to withdraw as a clearing member. Zimmerman went to jail, Leistner said. 

Leistner talked about how when Zimmerman started to trade size that was beyond normal, people alerted Lee Stern’s firm. The floor traders looked after each other, Leistner said.

There was another incident involving two traders wearing wigs and mustaches to disguise themselves as they traded Treasury Bonds. They took large positions opposite each other before a big economic number, and then when the market moved, they took profits on the winning trade and stuck the broker with the losing trade. Leistner said he knew those traders, but did not see them do their trading. 

There was a story about soybean option brokers giving “not held” orders to soybean pit brokers who would give them bad fills as the market was changing, Leistner said. 

Leistner said he was in the pits when the FBI was there and saw traders go to prison for $37 in outtrades. 

This was criminalizing the rulebooks, he said.

He spoke about the great deeds of traders on the floor, including some bailing out other traders who were caught in bad trades. There were people mentoring others all the time. There were many charitable acts going on, he said.

Leistner said the life lesson from being on the floor was that it was like having  psychoanalysis, and if he had a weakness he would have a chance to work through it. He also said that  compared to his writing background, trading gave him a lot of feedback. A trade either worked or it didn’t, he said.

He talked about his mentors, including his first one on the American Stock Exchange. He also mentioned a trading clerk who taught him about options. He also mentioned Les Rosenthal as a mentor. Leo Melamed also taught Leistner a lot when he was working at the higher levels of the CME, but Leistner called him more of a tough task master than a mentor.

Leistner spoke about some of the early offerings of electronic trading, including the Aurora Project at the Chicago Board of Trade and Globex at the CME. Leistner ended up as a consultant to Eurex for electronic trading. 

He said that he and the CME’s outside counsel at the time, Jerry Salzman, were tasked with figuring out what it cost to run the Eurodollar trading pit. The two figured it cost the member firms $400 million, which meant that electronic trading was inevitable.

When Eurex came calling looking for two consultants, Leistner was one who helped the German-Swiss exchange develop a strategic plan for the European monetary union in 1997. One of the tasks he had was to “bring back” the Bund from London, though it had never traded in Germany before, Leistner said.

Leistner said the Germans were very nationalistic in their goals and even in chatter about their plans. He cited Pat Arbor saying in a John Lothian News interview that when the Germans came to Chicago it was like a Panzer division, and Leistner agreed with Arbor. He also mentioned an incident when a Eurex PowerPoint presentation had images from World War I trenches in it and Leistner told Eurex they had to take them out.

Chicago’s futures exchanges were in the meantime training the competition, including the Chicago Board of Trade getting a State Department grant to help build an exchange in Japan, Leistner said.

Leistner said a seminal change in market structure came when Andreas Preuss of Eurex wanted to give direct access to traders rather than have them go through a broker. This made a material difference in the success of electronic trading, he said.

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