FM: Many folks, even within the industry, simply view futures as instruments to trade. Talk about what global economic benefits financial futures in general, and currency futures in particular, have wrought.
LM: It is beyond my ability to explain because it was soon recognized as an economic tool of such great proportion that any nation that aspired to be a financial center had to have such a market. They grew up like mushrooms all over the place, starting in the ’80s. By 1981 London recognized that it needed such a market. Once that happened, everyone ran to the drawing board. It was a fantastic economic tool, the cheapest way to [manage] a risk that anybody ever invented. It was efficient, it was cheap and it freed up so much capital that the private sector could use for all kinds of other investments. Even if it wasn’t used, the commercial knew [he] had somewhere to go. When the dealers bought American government debt every Monday morning, they could afford to bid better for the American taxpayer because they knew there was a layoff market that they never had before.
FM: Did you see futures as competing with or complementing the inter-bank market? How has that relationship evolved over the years?
LM: It was a little bit of love/hate. They didn’t think much of the futures market at the beginning. They didn’t consider it a competitor at all. Later they learned to use it and it became a profit center, so then we became good friends. To this day, we have a little competitive attitude because now we are an important success. They have taken a lot of what we instituted and applied it themselves, so they do compete in many ways. But currencies grew over the course of 40 years far beyond anybody’s imagination; trillions of dollars are traded a day. The market got so much bigger that there is no complaint on their side that the IMM took away their business, because their business continued to grow. So we are harmonious in many ways and complement each other.