Michael Stumm: Renegade Engineer

August 31, 2011 07:00 PM
Unabridged Q&A

Michael Stumm is a computer engineering professor at the University of Toronto, self-described "techie" and so much more. He earned a doctorate in computer science from the University of Zurich and holds five patents with several more in the works. He and high school trading buddy Richard Olsen founded forex broker Oanda, a company Stumm heads, that has brought institutional efficiencies to the retail trader. Stumm and Olsen, while both brilliant, simply had the will to do it. He gets downright angry when discussing unfair market practices and the advantages certain players are allowed to maintain over retail participants. We talked to Stumm about technology, innovation, regulation, traders' rights and the future of forex.

Futures Magazine: Michael your background is not typical for a forex broker. Tell us how you became involved with forex trading and creating Oanda..

Michael Stumm: All things are sort of accidents of history. I am a computer engineering professor, so I am a techie type of guy, and Richard Olsen was a high school buddy of mine, and he started an economic research firm that was doing currency forecasting. I advised him on the technological front and as part of that I saw him amass a huge amount of forex price data. At some point back in 1995 I suggested [putting it up on the web]. We wrote a quick application, put it out and traffic started to come to it. That was the first Oanda application. That was around the [time of the] dotcom bubble and it burst in 2000 and we looked ourselves in the mirror and said 'what we do anyone could do, we are just taking data from other people and putting it on the web-- there is no competitive advantage there.' We sort of naively said we should become a broker and put together a forex trading platform so that we could make prices and our prices [would be] legitimate, and that is how we got into forex trading.

FM: Did you ever consider making a career out of trading? What kind of a trader were you?

MS: I am a terrible trader. You wouldn't want to give me your money to trade. During high school Richard and I traded equities a bit and made a little bit of money. I would say Richard Olsen is much more the trader, I am more the technology guy, I am the one that likes to put together computer systems. The internet and computer revolution, that is where I feel at home. We sort of complement each other pretty well. Richard brings in more the financial engineering aspects and I bring in the computer engineering. It is really that marriage that got us going.

FM: You have chosen to continue teaching and pursuing various other interests since founding your firm. Why is this?

MS: I am an academic at heart; both my parents were academics. The smell of university halls make me feel at home and I have to say that I enjoy teaching. I like interacting with bright young minds, it keeps me young and energized, and a large part of my career is catapulting young people into their career paths. I do that at the University but I also do that at the company. You hire young people and help them build their careers. That is very gratifying. There are advantages in both directions. For hiring technical talent, I can see who the stars are and can direct them toward the company. At the same time, we are faced with a lot of challenging problems and it forces my research to be more practical than theoretical pie-in-the-sky things. It helps me at the University to do research that has a direct impact as opposed to just theoretical stuff. It is a win- win situation.

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About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.