IMM Tenth Anniversary Celebration

Leo Melamed
June 4, 1982

deco line

It seems like only yesterday:

There is the new/old floor at 110 N. Franklin,
The bronze chicken in front of the door,
There are the new wooden desks,
The blackboards and board markers,
The glass recording booth,
The old ticker tape machine,
Ken McKay with a rule book and Walter Kowalski in statistics.
And there is the Western Grand Champion steer, on the floor of the exchange---defecating.

It seems like only yesterday:

There is the old guard,
Harold Fox with ashes on his tie,
Count DeLattre whispering in French,
Sam Schneider shouting "lackity, lackity,"
And Irving Manaster reminding us to "trade small and last all Fall."

And the new guard,
Lou Madda thinking of retiring from action and getting married,
Marlowe King accusing someone of cornering the egg market (or was it bellies),
And Dave Henner low ticking the bellies (or was it eggs).
And there is Billy Muno screaming at a board marker,
And Lenny Feldman shouting to stop trading because he thinks he is broke,
And Jack Sandner making his debut to our family by slapping Eddie Cahill and punching out Wally Wizlewski.

I remember it like it was yesterday:

There are all the young Turks, secretly meeting as the "Broker's Club,"
to change the status quo.
And here is our first victory, the election of Bob O'Brien as chairman,
and a new era for the Merc!
Then our 50th Anniversary, we build a Poultry and Egg Building in Lincoln Park Zoo, and we try to launch Idaho potatoes---for the seventh time.

Wasn't it just yesterday when we were told
That you had to have an egg squeeze a month to bring business to the Merc,
That scrap steel and frozen shrimp were the contracts of the future,
That you could not trade a live commodity, such as cattle,
That pork bellies was the wrong name,
That women on the floor would destroy our ability to think,
That a new building would bankrupt the Exchange,
That the IMM was a loser.

It seems like only yesterday
When I sat around with Ron Frost, E.B. Harris and Mark Powers debating what to call this crazy new division we were about to launch.
I was chairman, so my choice prevailed.
Only yesterday when the price of an IMM seat was ten thousand
and Arnie Ruben rushed to sell it out for eleven.
Only yesterday, when our newly-self-appointed international financiers, the first IMM board of directors, took their very first European trip to tell the world about our great idea---and no one came to listen!
And Barry Lind discovered that you can go broke just exchanging currency from one country to the next.

Only yesterday
When Maurice Levy was in charge of closing 36 inactive currency contracts in line with his version of Interbank prices.
Only yesterday
When the gold window was closed, and George Fawcett and I could not cover our short Swiss francs for the next ten limit ups.
Only yesterday
When a high NY bank officials politely asked us to leave his office in fear we might become violent.
And Fed chairman Arthur Burns, no doubt humoring us, wondered how Milton Friedman got entangled with a bunch of hog traders from Chicago.
Just yesterday when the Mexican peso was devalued, and the world assumed that it meant devaluation of the IMM as well.
Just yesterday when Henry Jarecki scared the daylights out of us
by conclusively proving, with a mile-long computer run, that the IMM would bankrupt the bank of England.
Only yesterday when Nobel winning economist Paul Samuelson came to the IMM opening banquet to tell us that the IMM would fail.
Yes, only yesterday when E.B. Harris confided in me that our trouble was that we did not know it could not be done! So we did it!

Who were we?

We were a bunch of guys who were hungry.
We were traders to whom it did not matter-
whether it was eggs or gold, bellies or
the British pound, turkeys or T-bills.

We were babes in the woods, innocents,
in a world we did not understand,
too dumb to be scared.

We were audacious, brazen, raucous pioneers!

Too unworldly to know we could not win.
that the odds against us were too high;
that the banks would never trust us;
that the government would never let us;
that Chicago was the wrong place!

* * *

The IMM was a building wanting to be built but it was
too grandiose to be realistic
too complicated to be possible
too good to be true.
And yet it was built ... because, Everette,
We did not know it could not be done.

And, like any other building structure,
It needed architects, designers, engineers,
Some of them are sitting on this dais,
Others are recorded in the historical sketch prepared for this occasion.

But countless others remain anonymous---
The hundreds of construction workers who laid the bricks and applied the mortar!
Who made the IMM happen?
I will tell you who:

Not the presidents of the exchange,
Not the chairman,
Not the officials,
Not the advisors,
Not the Board of Governors.

The IMM was made by those same brazen babes in the woods who did not know it could not be done!
You, the members, made it happen.

The IMM like every exchange, cannot succeed, cannot innovate, cannot produce a successful contract without liquidity
Liquidity, that is the financial name for blood,
the blood which is infused by traders, and brokers.
Just as a human body must have blood to live,
so must a market have liquidity to succeed.
There is no substitute for it,
There is no other formula.

The advisors can advise,
The presidents can proclaim,
The chairman can coerce,
The board can cast its vote,
But, they cannot make a market.
Only the members can!
You made the IMM!
The generals may get the credit, but it is the nameless soldiers who win the war!

* * *

Still, among us all, one person stands out who cannot remain nameless.
One person who is in a category all by himself.
He was the only one among us who counted!
For when we proclaimed the IMM was a great idea,
An idea whose time had come---the world yawned or laughed.
When he agreed it was a great idea, the world took notice.

Oh, I know he may stand up here and deny it.
He may tell you he had but a small role
Don't you believe it,
I know better!

Milton Friedman, our guest of honor, is the man who made the critical difference.
His paper, written at our behest in 1971, explaining why a futures market in currency was necessary was the single most important factor to give us and our idea credibility.

His name was magical!
People who would otherwise not listen, because of his paper, gave us an audience.
Officials who would otherwise not have approved, because of his paper, gave us approval.
Presidents, financial ministers, central bankers who would otherwise not have allowed us near their doors, because of his paper, opened the door for us.
It was magical.

Little does he know or realize how often and to what extent his name made the difference.
If we were told fixed exchange rates are coming back
We responded, Friedman said they are not!
If we were told our market was just for speculators
We responded, Friedman said that is not so!
If we were told that we were crazy
We responded, Friedman did not think so.
And each and every time his name made a difference!

I remember the Winter of 1971. We went with Beryl Sprinkel and Mark Powers to visit the likes of Arthur Burns, George Schultz, and Paul Volcker.
How did we do? Darn good!
Friedman's message got there before we did.

I remember the winter of 1975. The CFTC would not approve the T-bill contract unless the Secretary of the Treasury acquiesced.
Who do you think called Secretary William Simon on the phone?
Milton Friedman, that's who.
And what do you think happened?
Our contract was approved the same day.

I can go on and on, but you get the point.
Milton Friedman is not only the best friend of free enterprise!
He is the best friend the IMM ever had,
So if he now stands up to tell you otherwise,
No matter how convincing he may be,
Don't you believe it.

And I can tell you now, he can be convincing.
His very good friend, professor George Stigler of the University of Chicago, on the occasion of the U of C.'s Nobel Prize celebration for Milton Friedman, introduced Professor Friedman in the following fashion:

Milton, he said, will begin a debate by asking you to grant him three simple assumptions.
For instance:

That $2 is better than $1;
That the law of diminishing returns is valid;
That individuals do not have complete knowledge of the future.

"Simple, undeniable assumptions, right? My fundamental advice," said Professor Stigler,
"Do Not grant him these assumptions. For if you do, you will find yourself led, by inexorable logic, to conclusions such as these:"

That the Federal Reserve System should be abolished,
That the Board of Governors of the Federal Reserve should be put on Social security,
And that Social Security should be abolished.

It is now my distinct honor to introduce to you our Guest of Honor, Nobel Laureate, Professor Milton Friedman and his wife, Rose.

* * *

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