This City Trades Different: Yogi, the Floor, and Building RCM

Speaker A: Foreign.

Speaker B: Welcome to the Derivative by RCM Alternatives. Send it. Hello there. Welcome back to the Derivative brought to you by RCM Alternatives. Where we've done it. We launched the new website. Go check it out. Rcmalts.com which works. Or samalternatives.com, whatever you want. Go check it out. Let us know your thoughts. Send us an email, investcmam. M. Com. Let us know what you like. Also, while there, tell us what kind of guests you want to hear. We want to hear from you. So shoot us a note onto this pod where I reached far to go across the hall from my office to Bobby Schwartz, partner, founder of rcm. Uh, got into his floor trading days. How it runs in the family, some good Chicago stories. And basically what RCM does bring, we do way more than just bring you this pod. Uh, so Bobby dives into all that and gives us a little insight into what's next in the futures industry and all that. Send it. All right, we're here with Bobby Schwartz, uh, whose office is right next to mine. I'm at home here, but it's a little weird to be looking at you in your office and I'm not sitting there next to you. How are you?

Speaker A: I'm doing well. I'm doing well.

Speaker B: So I know the story because I've sat in there many times. But tell us the, uh, painting and your jacket there.

Speaker A: Oh, uh, so that is a Leonard Niemann painting of the trading floor, uh, back in the day on the cme, uh, which shows how vibrant the trading floors were here in Chicago. Uh, and it's a very. It's unique. There's not tons of them out there. And everybody that walks in that was on the floor says, how can I get one?

Speaker B: Exactly. And I think the pod we just did with cbo, uh, I think he had one in his office. I don't know if it was the exact same, but it was similar. Might have been a knockout.

Speaker A: There's a couple versions that this guy did. Yeah, so. And, uh, yeah, it's a really popular piece to me. Uh, it's nostalgic, obviously, uh, being haven't been on the floor for many, many years. Uh, and it's great. And actually, that's my jacket over there from the floor, at, uh, least my last one where I didn't get crushed and I didn't throw it away. But, um. Uh, but yeah, so I, I keep it around to keep the memories and, you know, remember how great it was and how anxious it was and how volatile and how nerve wracking and all the above.

Speaker B: Yeah, we'll dig into that in a sec. So the badge was what?

Speaker A: My badge is Yogi, uh, which is on there somewhere.

Speaker B: Yeah, uh, I can see him.

Speaker A: You can see it. It's Yogi, which was given to me because people said I was cuddly like a bear, but I had a temper like a bear. And when I was in the pits, I took no prisoners. I didn't care if we were friends or not. Um, when I was representing Customer Flow or I was trading for my own account in the Spoos, I was a no BS guy and would run you over if I had to.

Speaker B: The, uh. And I remember from the floor, I. Some guy's like, oh, did you know so and so on the floor? I'm like, no idea of that name. And then they'd say his badge. I'm like, oh, yeah, that guy still has. Yeah. It's a weird.

Speaker A: I mean, I was. I was in Hong Kong about six years ago, and I'm sitting at a bar at a Park Hyatt. I think it was a Park Hyatt. And across. I recognize this guy, but I don't know from what part of my life. And he goes, yogi. And I'm like, ah, uh, what's going on? The next thing you know, you're drinking for four hours, telling war stories.

Speaker B: So, uh, and so tell us a little bit this. You didn't just start on the pit, you came from the pit. Right. Like, your father was on the pit, your brother went into the pit. So it was kind of a family affair.

Speaker A: Absolutely. Which, by the way, like, if you look at the Chicago exchanges. Right. Board of Trade, CME Options. Maybe not as much because it came later. Uh, it's a very. At least it used to be a very generational business. Uh, my father started there. Uh, he was on the floor for close to 50 years. Uh, and, uh, he started, uh, went to law school and at night came from New York. We're all from New York and New Jersey. And said, I'm going to be a lawyer. He got into Chicago Kent, and went at night and was a pit reporter during the day. And he said, I can make more money trading than I could as a lawyer. Uh, and so that's how we all got started in the industry. And sure enough, when I was in high school, we would go down there all the time. And when my father's clerk, who was in the hogs, he traded, uh, in brokered hogs, uh, lean hogs, he would pull me into the pit and this is when you were holding paper decks. He taught me how to calculate spreads. And I would run the order into him if it was there or about to go through the market, and. And he would execute it, hand it back to me, and I'd give it to a runner who would bring it back to whatever house it was, whether it be Goldman or someone like that. And then I specifically remember a story where I was 16 years old, pulled me out of school to clerk, and the spread was off. Came in the pit, and he physically took me and said, get the fuck out of here. And I didn't talk to him for two weeks. Many, many years from then, my brother was on his honeymoon. And this was in the NASDAQ pit. And it was like the movie Top Gun and where the scene was where all the planes were fighting each other. Towards the end, it was a, uh, it was a full contact sport. And somebody said, yogi needs your help. Can you go up there and help him, Phil? And he had a $30,000 error in about two seconds. And I said, give me that. Get. Go. So it was, uh, it was pretty fun.

Speaker B: The, uh. When was the first time you think you learned about futures? Were you, like five or six and your dad sitting at the kitchen table, like, showing you how it works?

Speaker A: No, I don't. You know, it's. That's a great question. I. To me, it was a stock. I didn't understand anything else about it. You know, I didn't understand the concept of futures. I thought he was just trading stocks. Uh, and I, uh, would say when I got on the floor when I was 15, 16, he would start explaining, hey, we're trading three months out or six months out on a curve. And I'm like, I don't get it. He goes, well, we're predicting where we think the market's going to be based on, you know, what's going. Is there disease in the hog world? Right? Or that could affect hogs, and that's going to affect prices and supply and demand. But I really didn't get it until I started taking classes, um, as soon as I graduated, and I said, I don't know if I want to do this. He said, just come down and try it. And then within weeks, I just was like, I'm not leaving. So I learned it. I took every class that was offered at the CME so I could learn, because he said a couple things to me that were really relevant. First thing he said is, your Schwartz people are going to open the door for you, and you'll probably get some good interviews. But you're Schwartz. They hate nepotism, and they're gonna want you to see you fall flat on your face. And he goes, I'll help you get your first job as a runner. You're on your own after that. He goes, you'll never work for one of my companies. And that was it.

Speaker B: So besides the high school, you were never a clerk for him?

Speaker A: No, never worked for him. He wouldn't hire me other than, you know, in high school. That was his. That was his M.O. he'll be supportive any way he can. Uh, and that was his thing. But he's like, you have to. He was. I'm going to help you do whatever you can, but you're going to have to do it on your own here, because that's how you're going to earn respect. And so my brother and I were the same way.

Speaker B: Was there an unwritten rule you couldn't go in the hog pit? So you weren't. You, like, you can't work for him, but don't work against me either?

Speaker A: Well, yeah. I mean, plus, I just didn't understand, you know, agriculture. It just wasn't my thing. Right. We traded equity indices primarily, and then some Eurodollars and whatnot. But, uh, and then crude and some of the energy quadrants. Um, but, uh, through carrying brokers, while we were on the floor, through Commerce bank of Germany, who was then sending the flow to the NYMEX floor, which is a whole nother story. But, uh, yeah, no, we didn't cross paths. He was on the same floor, but about, you know, a couple hundred yards away. And I'd see him, I'd say, hey, what's going on? You know, obviously had great respect. He was like the mayor of the floor. He's helped. He's just a phenomenal man. I mean, he's created thousands of jobs for people, and his reputation was great. He sat on the board for, I think, 16 years. He was vice chairman of the exchange. So I. You know, for Benji and I, we are very fortunate to have such a role model, um, and someone we respected, who had a tremendous amount of integrity. And every time now I go elsewhere, throughout this world, even in China to a certain extent, or Leo Muhammad, who's a fantastic guy. You know, everybody respected my father, and everybody asks, how's he doing? He helped me out so much here, he helped me out so much there. And I think one of the reasons why Benji and I have had success down there.

Speaker B: Benji's your brother.

Speaker A: Benji's my Brother, who was also a traitor. And granted we were lunatics in our own way, um, but we never wanted to mess with his reputation. That was the biggest thing. We never got on the drugs, we never did anything stupid. Um, because his reputation was more important than ours.

Speaker B: Something you said he started as a pit reporter. Like people probably don't even know what that is. What was a pit reporter?

Speaker A: Well, so nowadays when you make a trade electronically, the market is instantly reported globally and it's happening split seconds. Back in the day, you had people that were writing on trades that were on chalkboards, and then there'd be somebody on the phone with Japan, somebody on the phone with, you know, banks, depending on what market it was. And that's how it would get reported. And so it was happening over minutes versus now. It's, it's real time, instant gratification type quotes.

Speaker B: Um, and were you, were you ever sitting there when you were trading and um, like, this needs to go electronic. This is messy, this is. Or you were so in the flow and you're like, it worked at the time for what it was at the time.

Speaker A: You know, so when we, when we. There was only a couple markets that were still chalkboard when I started back in 97, 98, and that was the milk and dairy pit and eggs. That was insane to me. But we had pit reporters in our, in our pit. And every time you'd make a trade, you would sit there and let's say you did seven on 10. You know, you go seven, seven trade, like that, that was seven for arb. And uh, they would immediately click it and it would go global. Uh, and um, and the pit was very efficient. There was a tremendous amount of integrity. Uh, but just like any publicly traded company or a company that's going to be going public, you have to figure out how to bring in the masses and, and get more access and create more efficiency. And so CME was really a leader in that, uh, in creating the MINI contract. But the MINI contract at the time, when it came, it made a lot of sense, but it had some outlying issues that they had to work through for, for several years.

Speaker B: And could you have ever seen that the MINI would kill the big S and P, Right? That seemed like no way that would ever happen.

Speaker A: Never. I mean, the first, the first couple years, like, it just, we were like the mini contracts a joke. Um, when, you know, I mean, we're talking about the NASDAQ was in the 2000 handle, right? Yeah, 2200, 2500. You know, it wasn't even Close to where we are today. And back then it was, you know, the NAS. I mean you talk about the top five, ten stocks kind of like now represented, you know, 90% of the index. Um, I, and I can get into the style of trade that we did and I know you want to talk about that, but you never, when the MINI came out, it was five minis to one. The biggest challenge was it was supposed to make it efficient for, for people to be able to trade it. And because the margins got higher, because the, the, the, you know, the, the price of NASDAQ 100 went up, people couldn't trade it as effectively if they needed to get something. So they created the MINI contract which was five times the brokerage for cme, fcms, the whole deal. Uh, the problem was the, the MINI was off by the pit price. If the pit price was paying, you know, trading at 40, the mini was trading at 90.

Speaker B: And what year are we talking here? Roughly like 98.

Speaker A: No, probably 2000m.

Speaker B: So still even into 2000.

Speaker A: Yeah, and, and uh, you know, it. So you had all that inefficiency plus the contracts weren't fungible, which happened when oil e minis came out as well. So you had the post margin for minis and the outrights in the pit and it became very expensive. And even though synthetically you were hedged, right, you have one NASDAQ and in the pit you have five minis. Um, you're there, you've locked it in, uh, but you have to unwind it. And so it was really, it wasn't effective but because the spreads were so massive, it was worth the trade. And so you saw a lot of people that were on the floor also get on headsets and have these younger guys that were, were computer savvy. When I say computer savvy, like they knew how to email, right. And keyboard back then. Uh, and so they were trading the minis versus the Pit and that's how that big arc came. And I saw guys that were smart that, you know, if trend was your friend, you made a million bucks going, uh, to making $25 million a year

Speaker B: of doing that arb.

Speaker A: Doing just that arb. And then obviously there's larger arbs that came into play with some of the bigger groups, which we did. But, um. And so you can.

Speaker B: Yeah, but so you were in the NASDAQ when the bubble burst, when it all went crazy in that pit.

Speaker A: I would.

Speaker B: And yeah, two questions. One, they tried to launch the nasdaq, make it a thing. In the beginning it was Very thinly traded and nobody really wanted to do it. Right. So were you alone in there?

Speaker A: No, there was, uh, yeah, there was probably about 10 guy. I mean, we were in the right place at the right time. Right. They were just building a bigger pit because, you know, the tech stocks were coming out and it was becoming.

Speaker B: I remember it was like up to the left there. Right. It's on, like raised up if you're.

Speaker A: It was right above the S and P pit. The Niki was next to us there, which was about three people. Uh, and, uh, and so our pit wound up becoming, because of volatility, became the most popular pit. People were flying in all over the world trying to become members and would wait in line to get in the pit. One in, one out. But my brother and I represented 80% of all the institutional order flow. So we were talking with, I mean, household names now, as well as all the major banks and everything like that. Retail wasn't a thing. Uh, and so that market was intense. When you had errors, they weren't $5,000 errors you're talking about. You were hung for hundreds of thousands because the market movement was so volatile.

Speaker B: Now it goes up to 6,000 maybe, and then down to 4,000 or something.

Speaker A: I mean, as we grew. Yeah, but, uh, you know, if you had a 300 handle market move. Yeah, that was insane. Greenspan would talk, the market would just collapse or go up. Right. And, uh, it was a vacuum, so you couldn't get out of it. So if you were trading and you were on the wrong side, you either just blew out or, you know, or have a big problem or you made money. I mean, a 10 lot on a hundred contracts, you know, on a, on a hundred handle move, you're losing a million bucks. Right. So, uh, in the big pit and

Speaker B: take it through, like as a local. Right. So Goldman's saying, hey, we need to buy 200 NASDAQ futures. You're filling that order. That's how it used to work. The banks, all those traders would call in, need to get something done. So just give people who don't know how that all worked, how that worked.

Speaker A: Sure. So, uh, you know, a pit, um, hopefully most people understand what the pit looks like.

Speaker B: Uh, it's in the picture behind you. Go to YouTube and see the picture.

Speaker A: Exactly. So on the outlining part of the pit, there would be clerks, and those are.

Speaker B: Which is what I was in the bond pit. Yeah.

Speaker A: Everybody in the yellow jacket on the CME floor was a clerk. Anybody in another colored jacket was a member of the Exchange. And, uh, that could mean many things. You're a trader, you're a broker, you're both. Uh, so the banks were all on the phone, and let's say Goldman or Deutsche or ubs, they would sit there and let's say they had, you know, they wanted to work an order at $70 on 20 or 20 at 70. They were flashing the order, um, to my clerk, say, okay, I want to pay $70 on 20. And, uh, the clerk would come in and give me the order. And if it were on the market, I would put it out in the marketplace. I go, what's here? You know, to the overall pit. And they'd be like, 65, 75. And I go, 70 bit on 20. You know, something as simple as that. But sometimes when you have orders of like, 2,000 contracts, you knew you were moving billions and billions of dollars right there. And if people got in front of you and they said, 550, like, if you love them there, you're gonna really like them down here, because we're gonna run you over.

Speaker B: Yeah.

Speaker A: So.

Speaker B: And so you were like a human algo back in the day, right? Like you were doing your own iceberg orders and whatnot. Like, you couldn't show too much right. To. For the customer. Like, hey, I'm going to work this order to get the best price for you.

Speaker A: Well, they, they, they either would say, get it done now. Right. Uh, and. Or, like, you know, they'd say, buy 50 at the market. Uh, or they go like this. You have DRT five minutes and I. Five minutes to get the order, which is equivalent of, you know.

Speaker B: Yeah.

Speaker A: Some sort of, you know, vwap, T wop, um, iceberg, whatever it may be.

Speaker B: And at four and a half minutes, you're freaking out because you still have 90% of it to do. You're like, crap.

Speaker A: Yeah. But I mean, as soon as you know that, you know, you're looking at synthetic cash baskets, you're looking at certain stocks, you're looking at news based on what time of the day is. You're seeing what the S and P market's doing. You know, usually we were an indicator for them, but we would see them moving. And you have these cash rubber bands models that you would look at. And if you saw it kind of getting away from you, you know, and it was 70 bid at. At, uh, you know, 80, I would immediately go to Susana or Timberhill, which was Peter Freeze company, and I go make a market size up, and they'd be like, 60 bid on 500 and I just go whack and I just start whacking, you know, getting this, getting the orders done. And then the market would fall apart because they would be hedging against options and out of cash baskets and whatnot.

Speaker B: Um, I'll reiterate, for those of you listening, go over to YouTube because we're seeing all the good hand signals. Touching the ear, drt some wiggly fingers is what's there.

Speaker A: You always knew, like, what banks were doing. What? Because everybody, like, praise beige face, you know, Goldman Sachs, you know, uh, what

Speaker B: was Goldman like a ring.

Speaker A: Goldman was touching the ring.

Speaker B: You know, and should we say it all? That deutsche was.

Speaker A: No deutsche Wasn't that deutsche? Was this because they were lunatics?

Speaker B: Real quick, you. You mentioned the guys in other colors are members. Yeah, I don't think most people know. Talk about. You actually trade the membership like, uh, any other market. Right. You buy a membership, there's a bid, there's an offer still. As of today, I think it trades as of today.

Speaker A: Yeah, it was a commodity. I mean, you know, you. There's different levels of membership that allowed you to trade different types of properties, products. Uh, there was one membership called CME that gave you global access. And this is before CME Group bought Nymex and so on boards. Right. But, uh, just for simplicity purposes. And then there was IOMS that allowed you to trade equity indices and then options across the floor and then imm that international markets, currencies and whatnot. So, yeah, I mean, they were a commodity based on what was happening. And as more prop firms came into play that were becoming, uh, members that wanted to get smaller fees for ex, you know, clearing, uh, fees, uh, or exchange fees, they would start, uh, bidding up the seats. And that's how, uh, seats kind of went super bid. And then obviously we went public and they did A shares, B shares. But, uh, um. But yeah. So I was in the NASDAQ brokered NASDAQ traded spooz. And, um, I would flash in my orders to a broker, just like how I was in the NASDAQ into the S and P bid.

Speaker B: So you were trading S and M P for your own account and filling orders in nasdaq. But that's weird. So you were trading S and P from outside the S and P bid.

Speaker A: Right, but that's no different than how the banks were calling it in and everything like that. Right. So I was flashing into a clerk who was giving it to a broker.

Speaker B: So you were more taking positions. You weren't necessarily scalping in the S

Speaker A: and P no we were, we would scalp. I mean I was probably trading anywhere from 50 to 250 contracts at a pop. And this is when it was worth you know a 10 lot was 25 grand. So if we were able to get five, six handles out of it um, and then you know you'd lighten up and try to take in you know more. But we also would then be able to mitigate some of the exposure. But yeah we would trade spoos. My brother and I were, my brother was a bigger trader than I was for sure. Um but uh, yeah we traded spooz, we traded energies so crack pipe spread, stuff like that.

Speaker B: And then it all you said I've had enough. Why? And how'd you leave?

Speaker A: So simultaneously Benji and I, my brother started a prop firm trading the Minis. When the minis really started coming out we had no one on the floor. We're like we're going to go build an electronic business. And we built it up to about 40 guys trading uh all futures products and then we sold part of it and uh, I think Benji and I were just like great. You know we've had our heyday. I was 20 something years old and thought this was you know this changing

Speaker B: wasn't it starting to look like it's

Speaker A: all going electronic also everything started looking those going electronic. I left the floor in really 05 but was there until oh 8 uh and was uh really focused on the electronic trading part of things. Um and then I wanted to get another M on other markets that I thought were inefficient which were equity option markets. Um and back then the equity option markets were wide so you could sit there and buy uh an option on current day Nvidia uh and it was a dime wide and we had built gray box type technology, think about black box but allows human interaction uh to get in the orders and then the trader would get out of the orders. And so that was me and I brought Ed into a couple years later but um, we wound up backing close to 120 guys uh to trade for us between Chicago, New York and Philly. Uh and we called it Edge and Hedge um and built a pretty good business out of it for about seven years and then we regulated out of that and that's kind of when I started rcm. I had a little diversion after one of the businesses where I left didn't leave the industry but I left Chicago

Speaker B: so and go back to the prop firm days. So these guys were just salary are they putting up their own capital and Getting a share of their profits.

Speaker A: Nobody put up their own capital. We, they would get a share of the profits, uh, and usually they'd get 40% and they'd level up to maybe 60% at the highest. But usually we never went above 50. But we had different types of traders trading different products. Right? We had guys trading energies primarily, uh, equities, but some doing it more high frequency, uh, capitalizing on fundamental news. And our trade would be intraday or before the open when certain Bloomberg consumer sentiment numbers came out, which was a really relevant number back then. Uh, and we would just be trading those in the spreads. And the way we were doing it, we were getting back then you could pay Bloomberg, I don't know, it was like 15,000amonth to get the news five seconds before, uh, or three seconds before. And it was us, it was Citadel, it was peak six, Susquehanna, that we're all doing it. Uh, and uh, so we did well, we were very fortunate. So we had different people training options across certain verticals and time horizons. So we had about what you'd see is a modern day pod shop, let's say a millennium but public facing where we had different pods, uh, on the trading the futures and then ultimately we traded synthetic cash baskets against it at the amex, the CBOE and then the NASDAQ futures. And what I mean by that, it was Susquehanna and Timberhill and then we were the other big player in it. You would trade the futures markets just like I'm saying. But we knew that that top 10% of those stocks were really about 80 plus percent of the overall index. And so we would trade the futures and see where the options price were or the AMEX price on the Qs and if we would immediately hedge out there and we knew we were making a spread one way or the other, or we had a synthetic cash basket where we'd buy and sell these top stocks to lock in our profit.

Speaker B: Like a dirty dispersion trade they call it these days. Um, um, what, what are your thoughts? Did you see back in the day there were a bunch of prop firms all over the country or were they mainly in Chicago?

Speaker A: Chicago prop has always been Chicago.

Speaker B: Uh, which is why, why do you think that is?

Speaker A: I think because a lot of these groups came off the floor, you know,

Speaker B: I mean, but you could have had like come off the New York Stock Exchange and. Yeah, it's just weird that it became

Speaker A: a Chicago thing then the New York Stock Exchange. That mentality of New York was completely different than the mentality of Chicago. Uh, Chicago we're much bigger risk takers.

Speaker B: Do tell. Yeah.

Speaker A: Uh, you know, and I was in New York for a while, and back and forth from New York and Chicago. Chicago, uh, prop. Everybody came out of programs, right? I'm not talking about the bank programs. You came out of o', Connor, which was where our other partner, Ed Sweeney, came out of. We're talking about the most elite traders out there. They're like the Navy seals of trading. People think turtles are. Yeah, they're great for hedge funds and whatnot. But the real traders from o' Connor have gone on to build the biggest prop firms in the world.

Speaker B: I want to write a book someday about that before all those people die. Right. There's tens of billions, if not hundreds of billions being traded by alums of o'. Connor.

Speaker A: Oh, absolutely. I mean, some have gone on to run massive global banks. Yeah. You know, massive private equity. They've, you know, I mean, if you, if you talk about the biggest prop firms that you know about, they're all former o' Connor guys. Um, it's just the reality of it. They just. The brilliant ones.

Speaker B: Do you think the New York versus Chicago was New York? They had IV education, and whatever happens, they can fall back and they'll get a good job. And the Chicago guys were more like, I didn't. I got no education. I gotta make this work or else. Right? Or else.

Speaker A: I think we run a pretty sophisticated company at this point. When I was on the floor, there were people that could barely tie their shoes making millions of dollars. I mean, if you were on the street, you'd think they were homeless. Uh, and you would think they're one of the biggest bumbling morons you've ever come across. But they were great traders. And they start off as clerks and runners, and somebody wound up badging them up. And they've gone on to make a lot of money. Uh, and most people, when the floor is closed, were not able to do that and convert. So now they're all working union gigs for the city. So, uh, but yeah, I would say the big difference with Chicago is that the education was a big thing, but also we were bigger risk takers. Right. In New York, you working for really institutions and you were trading stocks. They didn't know Futures. Nymex was kind of a rare thing out there. Uh, even though it was growing, it just wasn't the same thing as really Chicago, because Chicago was home to anything and everything. Futures, all the FCMs were based out of Chicago. Um, you know, you, uh, name it, it was here Investment Banking was New York, trading was Chicago.

Speaker B: And then we can get to, uh, that later. But I've always argued, I feel like with a lot of the products that New York's coming out with, they're kind of like taking that from Chicago. Right. Like, we're going to wrap this futures trading inside an etf. And now you don't have to go to Chicago to get your futures exposure. You can just do it through this ETF. You can do it 100%.

Speaker A: I mean, hopefully the underlying still trading the futures. Right. And central cleared and whatnot. But yeah, I mean, there's a lot of different ways to get exposure. Uh, you know, back in the day, if you wanted to trade S and P, you were trading it on the cme, right? You wanted to trade off. There was no other routes to trade this. Um, even the indicators were very different when I was on the floor as to what they're now. There's a thousand indicators versus back then. There were like three or four that you really focused on. Uh, because you didn't have global markets back then, uh, it wasn't really, uh, part of the thing. You might have had fundamental news that was global, but everything else was really a couple different indicators. Uh, but, you know, I would, when I was in New York, you know, as a young guy doing okay, you always knew the New York trader that worked at a bank, uh, versus a Chicago guy because. Or when we'd be out in Vegas or Atlantic City, uh, we would be playing X amount of money at the tables, they'd be playing a little bit less. We're talking ticks. We're like, ah, uh, that's a ticket. You know, you lose 10 grand, that's a tick. You know, and they're kind of like they got the penny loafers on, you know, just a different type of group. Right. I mean, they were all Ivy League and working for the banks and they've gone through programs and that was their destiny.

Speaker B: So you left the floor, you're doing the prop firm somewhere between there and rcm. You were in LA for a bit. Give us a clue.

Speaker A: We had a, uh, bit of an exit on some of the stuff and then we let the, uh, prop firm kind of run itself. And, um, some of the guys from NINJA were working there and ultimately went on to NINJA and creating their own ib. But, uh, uh, yeah, so Goldman Special Situation Group. I wound up going out there. I always wanted to get in Hollywood. When I used to get smoked trading in a day, I'd go to a movie by myself for Two hours. And that was my escape. So I always wanted to do this and I always was going to live regret and then if I hadn't done it. And then some guy came up to me who used to be a Bonjour.

Speaker B: But you thought you like wanted to be an actor.

Speaker A: No, no, no. I didn't know what I wanted to do but I wanted to be in the business. Uh, and so some guy came up to me, he knew Jamie Lynn Sigler. He was managing her from the Sopranos at the time. Sopranos were the biggest thing in the world. Um, so I backed him on his management company. Uh, and um, then it kind of spiraled from there and I got to meet more people. And then somebody said some young guys from usc like we want to go do this. And there was like 10 of them trying to do a production company. And I said I'll finance it but I want him, everybody else as fired. And uh, I want nothing to do with these other people. They don't bring on any value. And I came at it with a trading mentality, uh, like a zero sum game and put a factor model together and then ultimately did some consulting for Goldman Sachs on their Special Situation Group which was a multi.

Speaker B: They were essentially funding movies.

Speaker A: They were looking to fund and put a billion dollar co financing slate together. And then also uh, looking at independent film and seeing where the edge was. And there was edge back then. Uh, and that was kind of like the Roaring Twenties and the golden age of Hollywood. It was back with independent film. And to me it was a trade. That's all it was. It was an arm like uh, Blair

Speaker B: Witch Project we're talking like that was,

Speaker A: that was an anomaly, right. And that was by the way produced and financed by Chicago, uh, Floor Trader. But uh, it was more. So let's say you did a movie like uh. My, my thing was taking a movie like uh, a movie called Unknown that I did. It was a contained thriller. You know, you're not moving around Teamsters and stuff like that. Everything is kind of within the warehouse. There's some outdoor seats and we could. Based on the names that were in the movie, I was using a foreign sales agent to sell different territories inside of all of Europe and Latam and Asia. And if I knew the movie was costing me $10 million for example, I could pretty, pretty much mitigate 85 my percent of my exposure in Europe and Asia and leave 25% of the market still open for my upside. And then I would have domestic, my domestic sale uh, as well. Uh, so. And Then I would usually do it in a state, make the movie in a state where I'd get subsidies. So where if I spent $10 million in that state, they'd give us two and a half million back. So already I'm net, net positive on the movie. It's just a matter of how much you know we're gonna wind up making and where.

Speaker B: The studios were just like we're going with this vision and they can spend up to whatever.

Speaker A: And yeah, they would have a tentpole type movie, uh, or they were doing 50, $60 million movies. Uh, they weren't interested in the small movies. Although they would buy our movies. Right. Cause they wanted the content and if they thought it was a breakout movie, um, sadly I did a bunch with a person who was very bad, who's now in prison. Uh, and um, uh but you know we were, we knew that in foreign sales everybody understood bang bang, shoot em up type mentality. Thrillers. If you came with a comedy, which I did a couple, it's, you can even big names, they don't understand the American sense of humor. So uh, we created a factor model. It worked. Um, but during that time I started my equity option firm. Put uh, up money and next, you know, I'm putting up more money, more money. It meant a lot of money and we have 60 guys and I couldn't manage the risk from, from Beverly uh, Hills.

Speaker B: So you were going back and forth for a bit.

Speaker A: I was going back and forth. It got to the point where I was going to New York on a Sunday, landing, um, landing on a Monday morning like Red Eye. Red eye. Spending four hours in New York. Our office was at 2 rector. Taking the bullet to Philly, spending the clothes there, going to Chicago for a day and then flying back. So. And I did that every week for probably about a year. And then it just, I'm like I've got a bigger chance of trying to build a citadel and convincing myself I can make a billion dollars with my equity option firm and always get back in the movie business. But uh, but I did a bunch of stuff in Hollywood. I'm very kind of proud as to what I did there. I worked with every major actor, writer, director in town.

Speaker B: Yeah, right, right to your left off camera is your whole reel of the big. What are Those called?

Speaker A: The uh, 35 millimeter prints?

Speaker B: Yeah, the 35 millimeter reels.

Speaker A: Yeah, yeah.

Speaker B: What was, were they like, who is this crazy Chicago guy? Like were they hadn't seen a trader personality like yours?

Speaker A: I definitely not. I mean uh, but I also knew my edge wasn't coming in there as a creative person. Right. If I said, I've got this vision for a movie, they would say, get the hell out of here. Who the hell are you? I came in and said, hey, I've got a big wallet behind me, which I didn't necessarily have back then. I, uh. And I said, I'm going to be making movies, and I have a model, and I'm going to fit in that model. And I had a very, very famous family out in New York who everybody would know their name, who I knew very well. And this person had said, hey, I'll introduce a guy named Ari Emanuel at wme at M that time it was Endeavor. And, uh, came in and, you know, got into it with him straight away because he's a lunatic. And he's like, I like this guy. Let's sign him. Uh, and I said, essentially, listen, if you don't want to work with me, that's fine. I'm going right to CA and I'm going to spend my money there, so let's figure this out or not. And that's when he said, I like this guy. But I worked with every major agency anyways. Uh, you had to, um. But my edge was I hired the right attorney straight away, uh, that could get me in the door and help me find scripts that represented writers and actors.

Speaker B: You were almost doing a little Netflixy model before Netflix, right? Like, hey, we're just trying to get content and make money versus artistic vision or whatnot.

Speaker A: Yeah, I mean, I. You know, what blew my mind out there was that everybody was creative. And when you'd walk in a mo. In a room with a guy like David Ward, who done the Sting, and, you know, I mean, just massive movies. French Connection won an Oscar. Uh, it was probably 60 years old. He had written a script called the Boys of Summer, and it was a phenomenal movie, essentially. You ever seen the movie the Replacements with Keanu Reeves? It was conceptually that. But it's about the Chicago Cup. So I was interested, uh, uh, where the farm team had to come up and play the World Series, and they wind up coming in and winning. Uh, and I was all about the money. And he was like, well, we can creatively do this. I go, no, we're not doing that. Like, we're not filling Wrigley Field with, you know, 25,000 people because I knew the cost of extras, whatever else. And, uh, you just had creative differences. But you get these younger people that were so, you know, writer, you know, Directors that just, you knew, not take advantage of, but you can control your own destiny with them, uh, and figure out a better way. Way to deal with it. And same thing with actors. You know, you'd get big actors that would try to get something made. Like Forest Whitaker, who had just won the Oscar for Edamine, and his agent put him in touch with me and I was at Warner Brothers at the time and drove on the lot. People were starstruck because he just won the Oscar. Um, and, uh, I decided to do a script just because it was Forrest Whitaker and he just won the Oscar. And I thought it was pretty cool, even though it was probably one of the worst movies I had made. Uh, but. And I made a lot of bad movies. So, uh, that Samsung, but it's, uh.

Speaker B: He was in it.

Speaker A: What's that?

Speaker B: He was in it.

Speaker A: Yeah, he was the star. He was my producing partner. You know, I. Jessica Biel, Ray Liotta, uh, Patrick Swayze's last movie. Lisa Kudrow, Kris Kristofferson, Eddie Redmayne, who's gone on to win multiple Oscars. Uh, it was a great cast. Uh, just our director, turns out, was doing heroin and, you know, but we wound up doing okay on it. And, uh, uh, you know, Jessica Beal was a big actress then obviously Ray Liotta would call me an asshole every day. And I gave up, you know, uh, the Departed for this. And I said, ray, if you give up the Departed, you're an idiot.

Speaker B: I don't know.

Speaker A: We're, uh, you know, a 12 million dollar little independent movie. And, you know, but he was a lunatic. Like, you got to know all these personalities, right? You know, hanging out with Patrick Swayze for eight months was just one of the coolest things in the world. You know, going over to Prince's house and you'd be like, this is insane. But it kind of became the norm. But, uh, you know, listen, I got to know Clooney very well, went to his house in Como many times. I'm going to be out there in a bit. I'll give him a call. Uh, you got to travel around with these people and you know, when you're on location somewhere, it was just the greatest because they were normal people, you know.

Speaker B: Yeah, that's the takeaway. Right? They're just normal people.

Speaker A: Yeah.

Speaker B: Doing a job. So somewhere in there you said, hey, I need to get into the Managed Futures business and launch.

Speaker A: No, I didn't understand what the Managed Futures business was. I, I said, let's create an I.B. uh, and because I was part of the proper. Yeah, it's kind of like a broker dealer which we had had. And uh, and so we're like let's see what happens here. Was 08 there was a lot of problems with people getting clearing and access and you know the services that the banks would provide now were, were totally gone. Uh, as far as. Because of compliance and costs and whatnot. We said okay, maybe we can step in and try to do this. Uh, so we got the license and all of a sudden, you know, MF Global blows up. And it was like right out of a movie. And I'd met a couple of the people here like Paul Rieger who's a partner now. And they were lost. They didn't want to go another fcm. They took a stab on me. Uh, and I took a stab on them. And we've successfully. It built a pretty good business over the years. But I would have to go to your website at Attain and that's how I educated myself on, on managed futures. And I would sit there and to uh, me they were hedge funds. Soros was a hedge fund. You know, I used to talk to him on the floor and really they're CTAs, they're registered across the board. But I didn't know what a CTA was. That was foreign to me. Um, I was a trader and ran a prop desk and uh, so I had to learn the industry. And luckily the people that came over to RCM really gave me a good education.

Speaker B: And that was 2010.

Speaker A: 2010, right, 2010. And we've been consistently building uh, since. And um, I understood. I'm a strategic thinker figuring out how to build and where I think there's edge and looking at competition and doing SWOT analysis. What are the banks, non banks doing? What are other groups doing? What is the need in the industry? And surrounding myself with everybody at this company allows us to be entrepreneurial with calculated risk and that's how collectively we've built the firm.

Speaker B: So we don't a lot of guests, we'll talk about it in passing but we never really get to hear what RCM does. Um, um, which is more my job to tell people what it does. But you're on the hot seat today. So give what does RCM do? Why is it important and how is you talked a little bit how it's grown into that. But as of today, maybe contrast that like in 2010, what was it doing? As of today what is it doing

Speaker A: 2010 we are simply a broker. Right. We are trying to get CTAs to clear us or via one of our FCM partners or execute. It was very simple. That was it, it was a relationship based game. Uh, as we've grown and acquired a couple companies selling one of them, we realized our niche was serving two different clients. And it took us a long time to figure out how to navigate this. One being all things traders, which is what we are now. Uh, because we have multiple clearing solutions across 10/FCMs, we're able to facilitate, whether it be proprietary trading groups, high frequency PTG groups, CTAs, hedge funds, commercial hedgers, ETFs, mutual funds, U sits on uh, all their clearing needs and making sure they have the right clearing firm based on what their style of trade is, whether that be just general risk margin, uh, technology, it could mean many, many things. Uh, and we've done a couple of

Speaker B: asset managers mostly, but then also some prop firm traders.

Speaker A: Correct. Uh, which is what I used to do back in the day. So yeah, so figure asset managers. Let's just, we can stick to that. Like CTAs, CPOs, hedge funds, mutual funds, ETFs, uh, and so they're utilizing us for their clearing needs across redundant FCMs, but they also, many of them use our 24 hour desk six days a week which is very unique and very rare and provides a tremendous amount of value. The banks and non clearing fcms or non bank fcms I should say don't really provide this service anymore. And so when we started this it was a loss leader and it was something I wanted to get rid of so much because I based a few

Speaker B: meetings saying hey, ah, if they're all trying to get out of it, why are we leaning into it?

Speaker A: Right. And it turned out to be a really good thing for us financially. Yes, it worked out. But also we provided a service and an expertise and built our own order management system and execution system, uh, into all the exchanges including China, which we can get into.

Speaker B: Uh, and the street term for that now is outsourced trading. Like we never really called it that. We said we have a desk, but really it's uh, outsourced trading.

Speaker A: Correct. So now we, so we run this 246 outsourced trading desk which allows ETFs, hedge funds, mutual funds, whatever else, to reduce their headcount and offset that risk by passing it on to us to manage and uh, execute their flow based on what the criteria that they gave us is. And we can do that in many ways, whether it be voice or files that they send us. Uh, it's a pretty, pretty great system. And so therefore that helped us keep and retain clients. And I think that's kind of the story of RCM is as we've grown, we try to figure out how to add more services to help facilitate clients needs. And as different clients and segments of clients such as ETFs or mutual funds have come into play, their needs are different than let's say CTAs or hedge funds. And so we've had to adapt. And that's one thing we've done that no one else has been able to do, is that we adapt very well to provide that value to our different clients. And that could include like clearing execution back in middle office, support, marketing, uh, help, uh, helping define what they want to do when they launch an etf, working with the entire ecosystem of an etf, mutual fund auditors, uh, you know, legal, whatever it is to help them come together and create a successful vehicle for them to trade and ultimately make money, which allows us to make money as well. The other side of the equation is

Speaker B: that real quick, before you go on the other side, talk a minute on the right people think a clearing's just uh, whatever, that's easy, these groups do it. But as clients get bigger, the needs change. Right? So talk for a minute about capacity and risk. And like you can't just go on to interactive brokers and buy, yeah, a hundred thousand VIX futures, right?

Speaker A: That's a big misnomer, right? So uh, as you become larger, uh, let's say you go from a million bucks to $100 million, uh, the clearing firms only have a certain amount of money to offer out to all their clients. And so there's capacity issues and it's all going to come down to how much are they going to make off any individual client and what is the risk associated with that client. And that's going to determine how much capacity of their money they're going to give you.

Speaker B: And that's all part of the how the system works. The clearing rooms have to post capital to the exchange as a backstop in case someone blows out, right? So that every trade is guaranteed for

Speaker A: every trade is guaranteed. Uh, and it actually starts with us because we guarantee the trades and the FCM's lean on us. And then the FCMs then guarantee the trades and then the exchanges and default funds guarantee those trades. So it's worked for north of 100 years. It's a great system and fortunately we've never had any major, major issues with that. Uh, now when there's capacity Issues now you're getting into billions of dollars potentially. Uh, they need access to margin or potentially different product suites, uh, at different FCMs. The benefit of RCM is that we will manage that entire process for you. We will set up the paperwork, we have all the information. Uh, and because we have the relationships with the different FCMs and the amount of business we do at these FCMs, we have the ability to get stuff done fast, effective and very efficient. Uh, to make sure that there's no downtime, we have the proper redundancy. Uh, and the FCMS know that because of our size of rcm, our risk group internally at uh, rcm, uh, we're a pretty well oiled machine so they really rely on us to do 95% of the heavy lifting and they just then get it done based on what we're looking to do. So, uh, and that's a big benefit for these clients and it's a real problem in the industry right now is that capital is scarce. The banks are either wanting to be in the FCM in the futures business or not. They'll facilitate it with their huge clients, uh, that are, you know, uh, 25, you know, like a citadel they'll facilitate or a big pension because they're making money across four other areas at the bank, uh, versus a lot of these middle market groups where I think we try to focus on. Although we've had clients start with 10 million that have now gone up to 60 billion. Right. Uh, having multiple ETFs and whatnot. Um, they need guidance, they need expertise and futures in derivs, like what we do is very niche and a very specialized expertise and that's what we focus on. And so we're able to really help out in every aspect of it. Certainly on the ETF mutual fund side where there's such a massive ecosystem that we help navigate and drive that on behalf of our clients.

Speaker B: Right. It's almost that the ETF space is bigger than the futures space, but they need the future. So how do you navigate that? How do you get that big square peg into that small futures round hole is what we're solving for.

Speaker A: Exactly. I mean, and you Obviously there's more ETFs. I don't know how many there are. I think there's 12,000 or something now.

Speaker B: I think there's more than securities, right?

Speaker A: Yeah, more than securities, more uh, than words that you can put together with the output. Uh, it's uh, a lot of people are coming out and launching ETFs. They don't understand Necessarily how much it's going to cost, how to do it and whatnot. Uh, and they really do rely on us to help them navigate that. In some cases, or I would say in most cases, we're telling them you don't stand a chance because of X, Y and Z, don't waste your time and money, uh, which is equally as important. And then if we think they have a fighting chance, then we'll help navigate the best way for them to do it. And once again that's one of the value adds. I mean we look at uh, a couple of the strategies that we have now that we've converted that we're trading long only equities but traded the futures because certain efficiencies, um, and we help them create the strategies and figure out the position limits and how to do it, set up the multi redundant fcms, work with all the different fund administrators and so on and really are the connective tissue, uh, making sure that all the connective tissue works together.

Speaker B: So that's side one asset managers, everything you do and then I cut you off side two.

Speaker A: Side two is really working with investors and investors could be, uh, ultra high net worth, um, looking to invest uh, part of their portfolio into futures because they like leverage, they like SMA separately managed accounts. And we help put their portfolio together and then once again set up the clearing and uh, the POA accounts with the different CTAs and do all the due diligence for them based on what their risk tolerance is. Uh, and then we deal with family offices, some pensions, endowments, some sovereign funds, all looking to us to help create that due diligence process because we manage all these, we're always constantly doing due diligence on all the major CTAs, uh, hedge funds and whatnot that are out there. Uh, and so when you're a family office and you have 5 billion or you're a, ah, pension endowment, insurance, whatever it may be, you're not going to invest more than 5% of your allocation in the futures. Even though if you're putting $25 million in, it's probably going to be trading like 50, which is a big benefit of futures, assuming that you're comfortable with the risk, sometimes even more. But you're going to depend on us to do that research. You're not going to spend 50% of your time uh, doing due diligence and research on what ultimately is going to be your 5% allocation. And we have a phenomenal team that does it. Also one of the things which obviously you run, you know, better than me, is that we have APA funds which when attain came over to us, uh, at rcm, uh, they had a fund platform and that allows ah, us to create fund to fund models for different investors that just want to sit there and plug and play and get access to certain exposure, whether it be on the offensive side, the defensive side, and then different types of products and it will fit into once again their portfolio based on what they're trying to accomplish.

Speaker B: I want to ask you, um, which, which side do you like better? You like the managers or the investors better?

Speaker A: You know, I'm not good at dealing with investors, so it's, I, I, I don't, I can't ask anyone for money unless I'm putting money in myself. So I, I like dealing with more the strategy, dealing with managers, helping them understand the nuances, dealing with the fcms, the banks. Um, uh, I'm not good with sales. Uh, it's never been my role. Uh, my role is to help salespeople make sure they get what they need done operationally. Same thing. And then really negotiate out the deals for any type of M and A business that we're doing or creating strategy and then working with our highest level

Speaker B: clients, which is weird. You'd think you'd be great at sales. You like to talk. You got stories.

Speaker A: I've, uh, got great stories. I mean, listen, there's a reason why, you know, Paul and some of these other guys pull me into dinners with some of our larger because I, I, they love the stories. Uh, and also, uh, you know, they also know I can be very serious and get the stuff done as well, so. But yeah, I can't Money and then.

Speaker B: Who's your favorite partner?

Speaker A: Lrcm.

Speaker B: Yeah.

Speaker A: Yeah. Uh, you obviously. Yeah. Uh, you know, the one thing I would say about RCM which is really rare is that our retention rate at the firm is unparalleled to anybody else on the street. Right. Well, I mean, what are we, 90 plus percent retention since we started a firm. So that could swing both ways. One, to me it's like a, it's, it's a testament to our culture, which sometimes works, sometimes doesn't, doesn't always gel. Uh, but um, uh, we have a phenomenal group of people here. I don't have to look over my shoulder, which is great. Which obviously as a trader you always have to do that. Uh, we built a really good team. Uh, and once again, entrepreneur. We support our people and we can get into China, ag, whatever it is to go off and Build different business units based on coming up with a case study in a thesis. And then we back into a compliance legal risk money. And then we back these guys and we back everybody to try to go off and let them make more money and as well as us make more money. So we have a really great team that's been here. But you know, I tell people we have a 90 plus percent retention rate and they're like, well, you're not managing these people. You should be firing X amount of people every year.

Speaker B: Yeah.

Speaker A: And uh, and so on. So it kind of swings both ways.

Speaker B: So talk quickly. Two other. So outside those two main pieces of the business, managers, investors dealing with futures, we have two kind of side types of the business, uh, ag and china. So talk about those two quickly.

Speaker A: Sure. Once, uh, again, ag run by Jeff Eisenberg inside the firm, uh, was a managed futures broker essentially and came up with this idea that hey, we want to get in this part of the business. We have some people that are ag brokers. Uh, and um, and so we said okay, how much is going to cost? And we just got behind it and we said great, let's go build it. Uh, and ultimately now what do we have 40 people on that business? Yeah, uh, roughly 40 people in several different states. Uh, and uh, we've been able to build a good business not just on brokerage or crop marketing, but now trading the different verticals and uh, uh, and working with massive financing companies, some of the largest in the world that are taking clients that we have, whether it be producers or uh, buyers, whatever, you know, in Latam, Indonesia, whatever it is. And we help the entire process of the value chain from m. Uh, you know, the crop, figuring out the financing, uh, to logistics all the way across, uh, as well as traditional hedging and whatnot.

Speaker B: So I think that's a good example of the ethos of the whole business, right. Of like, hey, we're what do you need? What? And someone's like, I need financing because I have this. I need to buy this grain out of Suriname, um, or something. And I need the financing to get it on a boat. And we're like, well that's not really what we do, but let's figure it out.

Speaker A: Yeah.

Speaker B: Um, so that I think that permeates through the whole company.

Speaker A: Yeah, it's. And it's allowed us to grow. I mean, you know, you throw a little bit of shit against the wall and you see what sticks. Right. I think we've been good at saying, great, let's go and then realizing this is not going to work pretty quick and just cutting it off, uh, which is equally as important, uh, you know, but we do take stabs. And we built the 24 hour desk. Right. We bought out attain. We bought out the, uh, the Algo Group, which was called rcmx, where we saw that there was a need for Algo execution in the business. And there was one player, everybody was paying through the nose and we're like, great. Ed and I knew the technology, we knew the people that were running it because we all traded the other back in the day. We bought it out from Webbush and uh, ultimately we built this Algo company and we sold it to private equity three years ago, uh, and still own a piece of it and get an exclusive license and whatnot. So we've done some really interesting things, but it all comes back to like you're saying, how do you service the clients? Like, what are their needs? What are the biggest pain points and how do we solve for it? And fortunately we're, we're well financed. Right. We've never taken an outside dinner like that. And we're able to take some risk that no one else has. I mean you look at different IPs, they're the kind of mom and pop shops, uh, versus us. We're really the size of FCMS and we provide almost more services than FCMS, certainly as it pertains to marketing and cap intro and the 24 hour desk. Yeah. Remember, we have four FCMS that utilize our 24 hour execution desk for their clients. So.

Speaker B: And you've thrown around before like a mini prime, we kind of act as. Right. It's like we need a new category basically. Like, we're not really an introducing broker.

Speaker A: Right. I mean we also still have our, we have a broker dealer, we have an ria. We. There's a lot of different components of RCM that a lot of people don't realize. But yes, when I go out there and I'm at an ETF event in Omaha, Nebraska last week with, you know, a bunch of different issuers and RIAs, I say we're mini prime on the future side because that's really what we do.

Speaker B: Uh, so what's next? What's on the future board? Where do you see the industry going? What, where. What's RCM going to do about it?

Speaker A: That's a good question. It's moving fast. Right. Uh, you know, we've seen that obviously, uh, more and more products are coming out. More and more exchange exchanges or what we call DCMS, have, uh, been approved by the CFTC. Uh, there's 27 more in the hopper to get approved. And essentially what these exchanges are, you think of CME Group, you think of ice, you think of urx, they offer their products, but we're getting into prediction markets, right? Sports betting, you know, betting on different events, whether we're going to go hit Venezuela, where there's been a lot of controversy around, uh, and there's Kelshi, that's done a great job on that, that's now become a regulated unit. You have polymarket that's become regulated. Well, those are the two most well known. But you have some of these. You have, you know, 30 plus entrants that are coming into the space that are trying to do something like that or a derivative of it, um, as well as different clearing organizations. But putting those pieces together and then taking in perpetual contracts, which CME is now suing the CFTC for approving it, uh, the game is changing very fast. As soon as crypto came out, uh, over, you know, a couple years ago. Next scene, O we're talking about stablecoins, we're talking about, you know, um, all, all these different products which enabled the universe of what we do to become more globalized and also move in different directions and more creative directions than the way we've always done things. I think it's good for the industry. Uh, but I also think there's, there's challenges, right, because Everybody's talking about 24, 7 trading, uh, and some of the things that are going on and perps and perpetuals and uh, what are the benefits of those? Are, Ah, there is, there, is there going to be institutional flair for it. Uh, Kelshi is in Polymarket are just kind of crazy, no brainers. You know, I was betting on the super bowl that took five minutes and I had 30 bets. My wife, who is English, who could care less about the super bowl, put in all the bets into chat gbt and she crushed it and I got crushed. So, uh, you know, it's, it's pretty interesting where it's going.

Speaker B: Just, it just came out. Polymarket was paying content people to like put fake trades on their screens that I made all this money on Polymart, so there's a little dark underbelly to some of it too.

Speaker A: But, but you know, the thing is like, that all came out of Chicago, right? Polymarket, the guy who owns it, is the nephew of one of the biggest prop groups out in Chicago, which here we all know the name. Uh, and Kelsey came out of, you know, they were a DCM at Ledger X, which was owned by ftx, which was out of Chicago. So there's a lot of things here that we're well aware of, or at least I was aware of what was going on, didn't understand it and didn't think it was going anywhere. I thought it was ludicrous. Like when I met with the Calci guys or we looked to buy Ledger X. Uh, now it's just become insane, right? People are building these different exchanges and they think, okay, I'm going to be able to go off and now put S, uh, and P lookalike product on there or something like that, or create betting. And because Bitcoin or Coinbase bought, uh, a new exchange called Ferrex probably five years ago or so for $300 million. It was doing no volume, but had the license. Now it's created this craziness where if you are able to get the license, you have massive firms like Kraken and, you know, Ripple, uh, and whoever else buying all these different companies which have now made prices go up. And they have to justify that. And if they have all those retail client bases, they're going to create these products and sell them internally at their clients, and there's a demand for it.

Speaker B: And a DCM is essentially a derivatives exchange, right? Huh?

Speaker A: Correct. So, you know, in layman's terms, it's Chicago Merc and the CME Group, it's ice, it's your ex, right? They're the same concepts.

Speaker B: But you would. I would sit there and go, who. Who in the world can compete with cme? But polymarket Kalsheet proved like, there you can, if you build a platform and get enough retail probably in there, that's, um.

Speaker A: I mean, you know, you look at a, uh, couple of these. Look at Ninja, right? Ninja Trader, which got bought by Kraken. And they also. Kraken also bought, um, Bitnomial, which is another dcm, uh, and dco. So clearing and, uh, and Exchange. Exchange, essentially is where you offer products. Clearing is who clears those products for traders. Uh, it's similar but different. And, uh, so CME has a exchange. They also have a clearing outfit. Um, but Ninja was an FCM. They sold for $1 billion. Now, the guys that ran that, one of them was my assistant at the prop firm. The other one was my CTO that came out of ped's company, Timber, uh, Hill. And now they're looking at me like, hey, son, where's my coffee? You know. Yeah, no, uh, but they're great. Guys, I'm happy for them. But that just goes to show you that if you have a retail client base that's worth a certain amount of money, because, you know, look at Robinhood. All of a sudden, now you can start offering wealth management. You could offer all know, Coinbase is 60 million or maybe a 6 billion users or some. Some crazy number. 600. It's just some bizarre number. And they're trading just their. If they were all of a sudden saying, okay, we're going to have CME products, we're going to offer stocks or equities, think how much wallet share they can get.

Speaker B: Yeah.

Speaker A: You know, and that's kind of the way these other groups are looking at it.

Speaker B: So the m. The main thing to me is like, the lines are blurring. Right. Like we were talking the other day, I was just thought like, Kansas City Board of Trade, Minneapolis Wheat Exchange, like those just were. Came with the earth. Like they just existed for all time. But like, no, someone back then said, like, I'm going to go compete with the Board of Trade, um, and started up some upstart exchange.

Speaker A: Yeah. And listen, it makes sense. It makes sense, but I can tell you, sitting here as we speak, 98% of the people that are on Kalshi or Polymarket don't understand it's a regulated entity. As a DCM or, uh, a DCO or an fcm. That is foreign tool. It's absolutely foreign, uh, because they can open it up with their credit card in five minutes or an ach.

Speaker B: Yeah.

Speaker A: Versus, like, institutionally you want to trade Spoozer, you know, your ex, or any of these other products. I mean, we trade 300 markets globally and that's without all these prediction markets.

Speaker B: Right.

Speaker A: You gotta. It's a process.

Speaker B: Any thoughts? Does you think anyone will, like, lose sight of, like, lose track of the ball? Like, they're so focused on getting a new DCM and all this retail that they kind of ignore what's happening in the core institutional services. Right. We can. RCM can kind of fit right in there. Like, hey, you go ahead and do all this retail stuff.

Speaker A: Yeah, we love it. Right. I mean, we know different fcms that are saying, okay, we're focused on that. We're cutting back risk on clients because we're going to put money and capital towards this. They don't really have any edge. They don't have their own dcm, they don't have their own dco. Right. So what happens to them? I think we're in a great position at rcm, um, knowing that we have the multi clearing relationships and uh, the execution and everything else that we do to really focus on that middle market business. And that's what we do well. That's what we do well. Because all these other groups, there's so much noise. I'm not saying that noise is irrelevant, it's very relevant. But it's not what really the institutional world really does. Um, and so yeah, I think people are overlooking that. And that's where you know, we've seen it. We step in and we're able to solve for those problems and utilize our services to get them to where they need to be. Those fcms and some of these other groups, they don't even, they're not involved in anymore, they don't have the capital to deal with anymore. So.

Speaker B: And maybe they're become the winners in their eyes. But like not for those types of clients.

Speaker A: Like hey, listen, we can't, we, you know, we can't be everything to everybody. But what we do well, we do, you know what we do, we do it well and we're able to really service our clients and that's not going to change.

Speaker B: All right, we'll finish up. Give me four. This is Chicago month, so four Chicago themed trader stories, Gibsonish type stuff, whatever, whatever you got.

Speaker A: So I'll tell you a couple floor stories first. So I was clerking on the floor my second week and I was doing the Arb and uh, my broker was second week. Uh, what's that? Second week?

Speaker B: Your second week. So you're 20 something?

Speaker A: Yeah, but I would go in my elevator every day. I live down 36 floor, I go 1, 2, 3, 4, 5, 6. And that's how I was able to quickly do the ARB signals. But I remember turning around to my broker, Joe Santoro, two and a half, three minutes left in the day. And this guy from Deutsche bank, this Danny, who's a complete utter scary lunatic, gives me flashes being in order. I give it to Joe, he's on the floor having a grip or a heart attack. And I'm going, help me. Oh my God. Holy shit. Help me. And the guy from Deutsche bank goes, you, you, you're out. And he gives us. And then it wasn't until the bell and everybody was really close that somebody came and uh, and started working on him.

Speaker B: Oh my God.

Speaker A: Yeah, it was, that was my first thing. And then I remember seeing somebody OD and I'm like, holy shit. You know, another guy went crazy, took his pants off and started running around.

Speaker B: Um, and they were often fist Fights, all that stuff.

Speaker A: I mean, I was one of the best cases when I was getting doing. You know, Goldman was doing due diligence on me for, uh, the entertainment business. They said, what is this infraction that you had where you had to go in front of the board of directors for this fight? And I said, well, I was a top step trader. There was a local in front, and we were playing for a lot of money, and he tried to get in front of my way, and I grabbed him. He called me, you know, a dirty Jew or a couple other words, and I grabbed him. And the pit reporter said, yogi, don't do it. It's a $10,000 fine. And I go boom, boom. I said, bill me. And then, you know, two days later, we're in front of a board. They've got seats out both directions. So we're not sitting there. We move the seats together and be like, this is common day practice. Like, you know, it's not a big deal. We went out for beers afterwards. It's, you know, when you're. When you're. It's a full contact sport down there, and you're. You're playing for big money. Um, but, yeah, we used to. You know, our team, we had 80 people on the floor, whatnot. And all these guys were enormous. They were linemen, you know, and we would travel in packs, and when we went out, man, we Chicago traders ran Chicago. Now it's lawyers and PE and whatever else, and the floors are irrelevant, but we would go out and just clean house, walk into Gibson's. There'd be 15 of us, and, you know, we're just taking it over, and we were spending a lot of money,

Speaker B: literally move people at a table.

Speaker A: You know, we had Gibson's. We had this place called Jilly's, which was a big mob hangout. Sinatra's bodyguards place, and then Rosebud, which was a big deal here. Who now has gone on the Chicago cut. He owns Chicago cut. Uh, yeah. We'd be like, they're in our table. They need to move. I remember John Cusack was at the table. We'll buy him dinner, get him away, you know, and, uh. And they would do it because we were just, you know, just.

Speaker B: He's a Chicago guy, too, right?

Speaker A: Yeah. I used to. I used to live on the top floor of a building, and he was my neighbor. He was.

Speaker B: And we're talking like tens of thousands of dollar meals and whatnot, right?

Speaker A: Oh, yeah. I mean, this is back in the day where you would have banks that were in New York or London. And they were coming out from Thanksgiving, uh, to like the second week of December was when everybody's coming out and you're putting them up at the Peninsula. You're getting a lot of other things for them that they wanted, and they'd whack you on dinner and you'd be spending 30, 40,000, which back then in the late 90s, early 2000s, was a tremendous amount of money. Right?

Speaker B: Yeah.

Speaker A: Um, which is still a steak was

Speaker B: only $40 back then, not 110 like it is today.

Speaker A: But we. I mean, they were hitting you for Chateau Lafitte. Right. Any the. The best wine out there. And, uh, so we had some cloud at these different restaurants because they knew we rolled big and. But we demanded certain things. I mean, it was. That's the way it was. Traders really ran this. And then CME traders, specifically nasdaq, where I was always on the COVID of Wall Street Journal or, you know, FT overseas, whatever it was, because I was so animated on the floor and I was a lunatic. And they would have me grabbing people or, you know, when the bear shows his hands, because my acronym was yogi. I, uh, everybody knew who I was. And so I remember, you know, I, uh, go on a date to Joest. Don't grab with this girl that was a knockout, and she's like, what do you do? I go, I do this and the other. I didn't really explain it. Next thing you know, the maitre d comes over. Bobby, we have your corner table running for you. Mayor Daley's over there. He wants to say hello. You know, I mean, just crazy shit. And it was a blast.

Speaker B: We'll leave it there and tell people we launched a new website that has all this. If Bobby didn't explain it well, go check out the new website rcmalts.com and, uh, you can learn more.

Speaker A: Thank you.

Speaker B: All right, that's it for the pod. Thanks to Bobby. Thanks to RCM for supporting. Thanks Jeff Berger for producing. We'll be off next week for the 4th of July, 250th birthday. Go USA and, uh, go USA in the soccer too. It's been fun watching. We'll be back the week after that with someone good. I don't know exactly who it is yet. Peace.

Speaker C: You've been listening to the derivative links from this episode will be in the episode description of this channel. Follow us on Twitter cmalts and visit our website to read our blog or subscribe to our newsletter@rcmults.com if you liked our show introduce a friend and show them how to subscribe and be sure to leave comments. We'd love to hear from you. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM alternatives, their affiliates, or companies. Future due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations nor reference past their potential profits, and listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. M.