Richard Sandor Makes History With Financial Futures – John Lothian News

Thom Thompson

Thom Thompson

Editor

Richard Sandor is known as the “father of financial futures,” a name given to him by the Chicago Tribune and the Chicago Board of Trade for his work in helping to create 30-Year Treasury bond futures and many other financial contracts at the Chicago Board of Trade when he was their chief economist.

Sandor was interviewed by Thom Thompson of John Lothian News for The History of Financial Futures video series. He tells the story of teaching at the University of California at Berkeley and being asked to help create an electronic exchange to trade interest rates. That effort only led to a white paper, but it started him on a path that led him to Chicago to become the chief economist of the world’s largest commodity exchange, the Chicago Board of Trade, on the eve of a transformative era for the derivatives industry.

He helped create the Commodity Futures Trading Commission and pass the Commodity Exchange Act, which allowed for financial futures to be traded. He worked with then-CBOT Chief Counsel Phil Johnson, who went on to serve as CFTC chairman, and then-Senate Agriculture Committee Chairman Herman Talmadge, to define a commodity as anything “tangible or intangible,” which would allow financial futures. In fact, the first new contract to be approved for trading under the Act was a financial futures contract. Additionally, Sandor helped get the CFTC exclusive jurisdiction, which meant even if the futures contract was on a security, it would be governed by the CFTC. Ginnie Maes were ultimately launched on October 20, 1975, despite a last-minute effort by the SEC to derail the launch.

When the 30-Year bond contract was launched, there was only $18 billion in U.S. 30-Year Treasury bonds outstanding. 

Chicago’s financial futures withstood challenges from the American Stock Exchange, which launched a Ginnie Mae contract, and the New York Stock Exchange, which launched a 30-Year bond contract. But the risk-takers in Chicago prevailed, Sandor said. 

Sandor left academia altogether to continue building a life in Chicago during an incredible time of innovation and growth for the futures industry. He later left the CBOT and went into the brokerage space to help further grow the products, first working for ContiCommodities. 

Over the years, he collaborated with other industry players, some of the most notable names of the era, to build financial futures into a worldwide phenomenon. The late Les Rosenthal, the CBOT chairman in 1980, was a mentor of Sandor’s. 

Today, Sandor is the chairman and CEO of the American Financial Exchange (AFX), trying to build new products to replace the disgraced LIBOR rate. 

Sandor is fond of wearing fedoras, which is a way of honoring his late father, who used to be in vaudeville.

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