FM: Did you take to it immediately?
JT: The speed [at] which this stuff happened is pretty incredible. It was new business and you [became] an expert in this new business pretty quickly. By the time I was 29 years old I was running the group: FX sales and trading so I had responsibility for the business in 1985. We did a lot of things on the floor of the Merc; we did arbitrage between the interbank market and the IMM. A big success factor was how quickly you could see relationships in your head and how quickly you could know that 33 was a third of 90 because you had to flip it around; one was in U.S. terms, one was in European terms. I worked in a grocery store for six years in the days before scanners, so [I would see] these relationships right away. It was fun for me. It is not genius stuff, I was quick at simple math.
We made a lot of money, relative to the time, doing arbitrage. Then we participated in the interbank market and there was risk that was taken but the sole message at the time is ‘customers equal profits.’ We are a customer-driven business. I enjoyed covering the clients; you got to know companies like McDonalds during their global expansion. It was very exciting to be a part of their global expansion as they moved into Europe and Latin America, and to have the opportunity to advise them in hedging programs and on investment timing in the foreign exchange market. That was really exciting and fun. I still think that foreign exchange is the absolute best market in the world. It is the deepest, most liquid global market. Everything affects it: Interest rates affect it, global political intrigue affects it, instability in any region affects it. I can’t imagine that any other market would be more fun, provide more challenges and have a more smooth application than the foreign exchange market. Every aspect of the entire global economy is part of the foreign exchange market. At a very young age I was able to do things that now would take years. The market was so young, you became an expert, and very quickly.
Everybody in the market was quite young. There was a lot of turnover, there was tremendous U.S. growth. U.S. banks and foreign banks were opening foreign exchange offices constantly because they felt like the more they participated in the markets the more money they could make. There was this huge [growth]. At one point there were 17 banks trading foreign exchange out of Chicago and now it is down to us in terms of a trading operation.
FM: Do you still enjoy it?
JT: I love it. My job has obviously changed. I am not out there doing the actual trading or selling; I am doing the management of the business, but I do love the client coverage [aspect] of it and I take every opportunity I get to talk to clients. I’ve had the opportunity to serve for 17 years on the New York Fed committee (an industry group that provides guidance to the global foreign exchange market). I have had an opportunity to work on the risk side of the guidelines and work with some incredibly talented people at other institutions to craft a vision of the market. And I had the opportunity in that same time period to work with the bank of Canada doing the exact same thing from a Canadian market perspective.
FM: Talk about the transition of the forex market from a purely institutional market for banks and large dealers to a global 24-hour market accessed by traders across the spectrum.
JT: When it was what it was, it was less transparent; the spreads were naturally wider. Then as electronic trading, transparency, market participation and speed became a part of the foreign exchange market, the institutions [were] disintermediated; their king-of-the-road position came out of the market and they had to think about reinventing themselves or adding value other than just providing liquidity.