From the July/August 2014 issue of Futures Magazine • Subscribe!

The time was right

A recurring theme when looking back at the launch of Commodities magazine was good timing. The initial issue included letters from industry leaders extolling the need for a voice of the industry. Think about this—by the time we published our February 1982, 10th anniversary issue, the industry went from simply trading grain and livestock markets to the development of a myriad of new sectors including financial futures. Gold was illegal to own in the United States when Commodities launched, let alone to trade. Energy markets developed, equity options were being developed, the Commodity Futures Trading Commission (CFTC) was created, and futures on currencies, interest rates and stock indexes were introduced or announced. 

The country survived the Vietnam era and was beginning to see the end of the road in its long battle with inflation. A lot had gone on in that 10-year period. 

I recall talking to Leo Melamed for our 35-year anniversary Agents of Change issue about powerful interests not taking his idea seriously. It was probably a break for Chicago’s Futures industry as those powerful interest could have buried Melamed’s baby, the International Monetary Market (IMM) at the time if they realized how big of an idea it was. Melamed quipped, “When they did recognize the potential and made a challenge, it was maybe a decade later and a decade too late.” 

It was in the same Agents of Change issue where Richard Sandor pointed out that the Securities Exchange Commission (SEC) had attempted to stop Ginnie Mae futures trading before it launched at the Chicago Board of Trade (CBOT) in 1975, claiming it had regulatory jurisdiction. But that was the exclusive domain of the CFTC thanks to the work of Philip McBride Johnson, who as outside counsel for the CBOT worked on ensuring the CFTC would have exclusive jurisdiction of all futures contracts. 

The term commodity was already becoming somewhat of a misnomer but it was Johnson’s adroit legal work that allowed for such things as interest rate and stock index futures to be defined as commodities. Johnson, another of our Agents of Change, pointed out that without CFTC exclusive jurisdiction, these new markets would have been buried in an alphabet soup of government agencies fighting to regulate them. “A multitude of authorities jostling with each other for supremacy, disagreeing on policies, making conflicting demands on the futures community. The futures markets could suffocate in that environment,” Johnson said.  

An explosion of innovation had begun, all within a half mile or so radius in downtown Chicago. And Commodities was there to cover it all from the launch of the IMM, to the creation of Chicago Board Options Exchange, to the creation of interest rate futures, to cash settlement and finally stock index futures. It is hard to imagine another period with such dynamic change. 

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