For our final day of the 2015 MarketsWiki Intern Education Series in Chicago, hosted by Trading Technologies, our special guest was the city’s mayor, Rahm Emanuel, who told the audience of summer interns that Chicago is the No. 1 destination for young people looking to start their careers right after graduating from college. Chicago is a great destination for several reasons, he said, including that it has the most diverse economy of any U.S. city., incorporating industries such as healthcare, transportation, professional services, and of course the financial sector and risk management in particular.
“No single sector drives more than 13 percent of the city’s economy,” Emanuel said. “And Chicago is the country’s capital for financial technology. It is also a third of the cost of either New York City or San Francisco.”
He took questions from the audience on the impact of Chicago on the financial sector at large; where crime fits in in the larger picture of the city; and, as floor trading ends, what the city is doing to keep Chicago the center for risk management and finance.
“The good news is we’re a very close community here in the City of Chicago,” Emanuel said. “We work across sectors. I see the financial sector as a major draw of talent, technology and capacity, which is why a lot of universities want their kids to come up to Chicago. And because of that we also draw other industries. That [diverse] portfolio allows us to be a recruiter.”
On crime, the mayor said there was good news and bad news.
“The city has had a 38 percent drop in overall crime in the last few years,” he said. “On the other hand, there are communities like Englewood that are a challenge – they are ravaged by poverty and gangs. We’re making progress in quality of life, but not in all parts of the city.”
On maintaining Chicago’s dominance as a financial and risk management center, Emanuel said it’s true that finance is now mobile, and trades and risk management can be done from anywhere, but he said he is confident that the institutional strength in Chicago’s universities, companies, intellectual talent and sense of community would keep it an important destination for risk management and finance.
Emanuel started out as a summer intern himself at the age of 20, working for Common Cause, the nonpartisan organization that lobbies for accountable government and fair elections. Through the internship, he met a man who was running for Congress and agreed to be his driver, later becoming his finance director. After college he worked for Senator Paul Simon.
“The intern opportunity got me my start in political work,” he said.
He said the internships the audience were involved in might not end up being their line of work, but they would be “where you learn responsibility, and meet people that will lead to other opportunities.”
Phupinder Gill, CEO of the CME Group, said he didn’t want to talk about his own career, which he began as a trader in the Chicago pits.
“You have heard a lot of good advice from legends in the industry” during the Summer Intern Series, he said, “but essentially in 10 years we won’t count anymore. The people running things will be you folks.”
He joked, “I always say the secret to my success is work for old folks because they’re going to die soon.”
Instead he talked about the challenge that organizations – including the CME Group – have in attracting and retaining “Generation Y” talent.
“Gen Y is group oriented, idealistic and socially conscious,” Gill said.
He ran down a list of other traits thought to characterize Gen Y, including: having less company loyalty (which he said is a good thing); desire to make a difference; caring about the company culture; and being ethnically and racially diverse.
Also, of course, Gen Y has always lived with cell phones and the Internet.
What will be important to Gen Yers in their careers is, to have a “positive, growth mindset,” to “be a sponge” absorbing as much information as possible, and to never give up, he said.
“For the first time in history, companies like ours are trying to fit ourselves to the generation we see coming, because your generation is thinking and doing things differently, and the old guys like myself have to get out of the way,” he said.
“You are the generation that will make the world a better place.”
Mary McDonnell, a senior consultant with Simon Compliance, graduated with an accounting degree, but didn’t know what she wanted to to, and eventually wound up at CME an as auditor.
She ran risk and business development at a CME office in London, where she talked to traders about how they had struggled, and the mistakes they had made trading.
Then, when she began trading herself, she realized she was making the same mistakes trading as the traders she had talked to.
“I found out that it is a lot harder to do something than to tell other people how to do it. That helped me to understand other people’s point of view,” she said.
When she started working with electronic trading, the floor traders would spit at her and threaten her, because they saw her as part of the movement that would take the floor away. She had no technology background, but “you learn it because you are put in that position,” she said.
“I ended up having good expertise in risk management, operations, business development, and international issues,” she said. “As long as you take the tough jobs and are open to new experiences, you can take the jobs you never thought you would have any interest in.”
The most important thing in this industry is to have your own moral compass, McDonnell said.
“If you look at any of the trading disasters or rogue trader incidents, it was always two things: there were no checks and balances in the organization, and some were living by different rules than everyone else, but the others were afraid to speak up.”
“If you see something that’s not right, put up your hand,” she said.
McDonnell was a woman in the trading industry when there were almost no women, and had to show she was as smart as others if not smarter. She said she made the mistake of thinking she could only show competence by showing she was better than everyone else.
“And I would say don’t do it. In this industry, people have known each other forever. You don’t want to burn bridges,” she said.
John Kerin, CEO of the Chicago Stock Exchange, said that throughout 200 years of equity trading in the U.S., everything had all been centered around human beings interacting with one another. The regulatory changes resulting from the 2008 meltdown fundamentally changed the structure of U.S. markets.
Reg ATS automated trading platforms and enabled off floor systems to function. Then there was the conversion to decimals from fractions.
Those minimal increments in the fraction system had represented potential, but now, for specialists with affirmative obligations, the risks outweigh the rewards, and about half of them have left the business, he said.
“Everything is electronically linked and traded in pennies today and everything is very fast. Spreads have narrowed but so has liquidity.”
This creates a problem for institutional investors, which is a concern for everyone because those institutions are investing money that middle class Americans rely on for their retirement, Kerin said.
The Chicago Stock Exchange is looking at addressing this problem through an on-demand auction, which could occur virtually any time during the trading day other than open or close, he said. The auction is intended to address inefficiencies in the market and mitigate the speed advantage high frequency traders have.
Andrew Lowenthal, senior vice president, business development for the Chicago Board Options Exchange, said the CBOE had learned a lot from its interns this summer about ways to connect to millennials, including the fact that Snapchat is supplanting Twitter as a way to communicate.
Although Lowenthal started out at CBOE right out of college and was still there 32 years later, he has had a wide variety of roles at the exchange, including market regulation, operations, strategic planning, and business development.
“So there can be a career path within one organization, though it’s rare,” he said.
CBOE is transitioning from a domestic to a global company, Lowenthal said, which means there are more opportunities available in the exchange community.
CBOE is focusing on growing through global efforts and through expanding in asset classes to be more than an equity and index options exchange, he said. It recently introduced TYVIX, the first exchange-traded contract based on interest rate volatility, which is tied to the CME’s 10 year note options. It is also expanding into benchmark indices and has just acquired LiveVol and agreed to a joint venture with Pulse, an execution management system designed exclusively for trading options. It has also entered into a collaboration with the Singapore exchange for an education program.
“So everyone can walk out of here thinking, maybe there is something we can do in this industry,” he said.