Innovation Drives Markets and the Maker of Financial Futures

Published January 18, 2010

Review of For Crying Out Loud: From Open Outcry to the Electronic Screen, by Leo Melamed
(Wiley, 2009, 343 pages, $39.95), ISBN: 978-0-470-22943-9

Leo Melamed created the financial futures market nearly 40 years ago, and in his new book he tells how the Chicago Mercantile Exchange became one of the world’s largest futures exchanges and a leader in providing risk management services.

In a word: innovation. The book describes “the Merc’s” singular drive to be the industry leader in both the products it offers and the efficiency of its services. It’s a testament to the strength of the Merc’s leadership and refusal to stand still.

The Chicago Mercantile Exchange was the first exchange to offer futures contracts for financial instruments, launching the International Monetary Market in 1971. Two decades later, CME Group launched Globex, the first global electronic trading platform, becoming the first futures exchange to move away from the open outcry system of trading to a new digital platform.  

These two landmark innovations were brainchildren of Melamed, now Chairman Emeritus of CME Group. They did not come about without opposition. In For Crying Out Loud: From Open Outcry to the Electronic Screen, Melamed discusses the transition of the Merc from its traditional open-outcry roots to the current electronic system of trading. Melamed describes from his firsthand experience the clashes of power and personality that defined the decade-long transition.

Innovation, Growth
Guided by his belief that “The Firsteth with the Mosteth, Winneth” and his confidence in the future of electronic trading, Melamed fought against what the late Nobel Prize-winning economist Milton Freidman called “the tyranny of the status quo,” embodied in the Merc’s reliance on the open outcry system, an anachronism which Melamed believed left the CME dangerously vulnerable to competitors.

Through a combination of shrewd planning, strong teamwork, and great timing, Melamed and his colleagues were able to guide the Merc into a new, electronic era, staving off competitors and elevating the Merc to a new level of prominence.

Melamed’s other achievements recounted in the book include the Chicago Mercantile Exchange becoming the first publicly traded U.S. exchange, a historic merger with the Chicago Board of Trade, and, in 2008, the Merc’s acquisition of the New York Mercantile Exchange.

For Crying Out Loud is far from just a blow-by-blow account of Melamed’s fight for change. It provides an inside look at the relationships and battles that formed the new CME, stories that are not often found on the business page and that show the importance of creative thinking, the drive to excel, and the determination to meet and anticipate client needs.

Matthew Glans ([email protected]) is a legislative specialist in financial services for The Heartland Institute.