The Wizards of Today's Markets: An Interview With Ray Cahnman - Part One

Trading Technologies' CEO Rick Lane interviews Ray Cahnman, the Founder of TransMarket and long-time trader who tells the thrilling secret to his longevity.

Online PR News – 04-October-2016 – Chicago, IL – Founded by Ray Cahnman in 1980, TransMarket has had offices across the globe and in 2016, the firm is enjoying its most robust year in both volume and profits generated.

I hope you enjoy the interview.

Rick Lane, CEO - Trading Technologies


Rick: Thanks for agreeing to do this. I suspect most people who are reading our blog and reading this blog post in particular know all about you and how you got your start. But maybe for those who don’t know so much, could you just give me a little bit of insight into the early days of how you got your start trading?

Ray: In the early 70s, I was working for a computer time-sharing company, and I made a sales call at the Board of Trade.

Rick: Did you say computer time-sharing?

Ray: Yes. That doesn’t exist anymore.

Rick: That whole notion is?

Ray: With computer time-sharing, one could access a mainframe computer, and ask “what if?” questions. It was accessed through a dummy terminal, a teletype terminal that operated at ten characters per second. The company I worked for had a database of interest rates from Bank of America. This database consisted of daily closes. At the time, the CBOT was developing an interest rate futures contract, and I thought that their research department could use my company’s database to run a regression analysis. So, I made a sales call. I didn’t get a couple words out of my mouth before they started selling me on taking an application for their new Ginnie Mae futures contract. As I walked out, I was handed an application for a Ginnie Mae trading permit. I didn’t make the sale, but they sold me. Before leaving, I filled out the application for a permit. I heard a convincing presentation from Doc Sandor, and I was in the Ginnie Mae pit on day one.

Rick: Day one of the trading for that contract?

Ray: Yes. I was there on the first day trading interest rate contracts.

Rick: And what year was that, roughly?

Ray: It was in late September, 1975. But prior to that, I had gone over to the CBOE, looked on the floor, and I saw the commotion. I saw people jumping up and down; it appeared as if there were some athletic competition involved. I knew that it was all about numbers; they were shouting out numbers. I didn’t understand what they were doing, but I could see that the activity was competitive and it involved arithmetic. And I was a competitive tennis player. In 1975, I was ranked the number one tennis player by the Chicago District Tennis Association. Rather than having great shots, I got there by having a lot of determination and being very competitive. Similarly, I was good at arithmetic. I had a math degree, but my strength was in numbers, not Greek letters. I believed that if I could figure out how to play this game, I could be good at it. When the opportunity opened up with mortgage futures, I got involved.

Rick: It’s funny because, like you said, it’s not complex calculus that drives much of the trading in futures, but it’s the ability to do relatively simple arithmetic really fast. And that was—when I got my start and saw the guys who were really successful and really good at doing this—that just floored me, that they were able to price some exotic strip of futures contracts in net change on the day, basically in their head, on a moment’s notice. And that’s pretty impressive. Only I think a handful of people are good at that.

Ray: Yes. It’s 2016 now. Computers are way faster. It takes 400 milliseconds to blink, but the transactions that are going on through CME are taking place at faster than one millisecond—at microsecond speed. That’s a millionth of a second. Things have gotten so fast that it’s impossible for a human brain to react like you could in 1975.

Rick: I remember when I stepped foot in the Eurodollar and the S&P pit for the first time in 2005—this was back when it was still pretty rocking. But I think for a lot of people getting their start in this industry today, all they have are pictures and history books, and they don’t actually get that experience firsthand. Maybe tell me what your experience was that first time you stepped into the Ginnie Mae pit. What was the first time that you actually saw a floor and you saw those people jumping up and down and shouting and yelling? What was that experience like?

Ray: Look. It was real scary for me when I first went down there.

Rick: It’s intimidating.

Ray: I didn’t have much. After paying a $5,000 for a six-month permit, I had $3,000 left. It took me a long time to find anyone that would clear me. Why would anyone send someone down to the pit that had only $3,000 in capital—they’d have to be nuts. The firm that cleared me, Shatkin—they did it more as a contribution to the Board of Trade. Doing their share in helping this market survive, they cleared one local that didn’t have much backing. The first day I was so scared that I didn’t execute a single trade.


Continue reading Part One - and learn about Ray's influential trading mistake.

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