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Pit Bull

IT'S A LONG WAY from the steel mills of Chicago to the high-tech world of electronic futures trading, but Ray Cahnman (MBA '69) will never forget where he came from.
The son of a German immigrant, Cahnman grew up on the south side of Chicago nine miles from downtown. He never could have imagined that he would one day become a renowned trader with multiple memberships at the Chicago Board of Trade (CBOT).

Ray Cahnman

Cahnman scored well on standardized math tests as a teen, so on the advice of a high school guidance counselor he enrolled in the engineering school at the University of Illinois. The mechanically disinclined Cahnman ended up flunking out after two disastrous years.

Desperate for work, he took a job at the Republic Steel Mill on Chicago's far south side, then a major center of steel manufacturing. He worked the midnight shift as a bander, fastening enormous steel coils for shipment, and later as a grit mill operator, sandblasting rough steel rods.

Cahnman worked just three months at the mill, but the experience had a lasting effect.

"I got a taste of what it was like being blue collar, working side by side with people who were going to be doing that for their whole life," Cahnman says. "I realized that earning a college education would be essential to getting ahead."

Cahnman played tennis competitively in high school, but he had lacked the athletic ability to earn a full tennis scholarship. After his experience in the steel mill, Cahnman convinced the tennis coach at DePaul University to give him a tryout. Impressed by Cahnman's scrap and determination, the coach agreed to give him a half scholarship. That half scholarship enabled Cahnman to cover tuition and enroll at the private university. He became a math major and graduated with honors, paving the way for his admission to the MBA program at Tulane.

Cahnman recalls his days at Tulane with fondness and gratitude. "In addition to being well published and prominent in their fields, Tulane professors were outstanding teachers," Cahnman says. "James Murphy in finance, Eric Vetter in management, Jeffrey Barach in marketing, Steven Zeff in accounting and Irving LaValle in management science helped give me valuable discipline that I apply on a daily basis."

In 1975, six years after earning his MBA, Cahnman was still searching for a career. While working for a computer consulting company, he made a sales call one afternoon to the Chicago Board of Trade. In an ironic twist, a CBOT staff member redirected the conversation to describe the CBOT's offering of six-month permits to trade mortgage futures. This permit cost $5,000. Although mortgage trading was then a new and untried activity, Cahnman left the meeting determined to become a futures trader.

Cahnman became one of 19 permit holders in the GNMA (Government National Mortgage Association) futures trading pit. After paying the permit fee, Cahnman had $3,000 remaining for trading capital. With his wife's income as a school teacher and the extra money he could make teaching tennis at night, Cahnman figured he could get by while learning the fundamentals of trading.

"People advocate setting high goals," Cahnman says. "I set mine really low. I reasoned that if I could make $15,000 a year, I'd be happy. I could survive on that."

Survive he did, but just barely. For the first five months, Cahnman was the most profitable futures trader in the pit and he was down $1,000. He walked to work through the snow with holes in his shoes because he couldn't afford to buy a new pair. When the six-month membership came up for renewal, Cahnman and his fellow mortgage traders petitioned the CBOT to waive the fee. If they hadn't, none of the traders were willing to continue trading. Luckily for Cahnman, the board agreed to waive the fee. Several weeks later Cahnman's fortune turned and he generated a profit, and he has continued to make money-and more money-ever since.

In 1980, he founded Transmarket Group LLC (TMG). Today as chairman of the board, he presides over an international organization with 200 traders on four continents.

In 2000 Cahnman became a director at the CBOT during the difficult period of transition from floor trading to electronic trading platforms. Cahnman recognized the limitations of floor trading early on and had a clear vision of the exponential growth possible with electronic trading platforms. Cahnman's vision of the future of trading was initially highly contentious and unpopular; today, that vision is widely accepted.

Under Cahnman's leadership, TMG invested heavily in sophisticated computer hardware, wiring and software to help the company compete effectively. Today all trading activity at TMG is conducted electronically.

The latest challenge has been the development of algorithmic programs to help traders execute complex strategies in milliseconds. At 63 years of age Cahnman is the only one of his colleagues from his early days in the pit still actively trading, executing thousands of transactions in multiple contracts each day. He even had his bedroom equipped with trading screens so he can monitor markets almost 24 hours a day.

Cahnman has high praise for the Freeman School's Trading Center. "The trading facility at Tulane is first rate and one that very few schools can match," he says. "Tulane students that wish to pursue trading as a career have a distinct advantage."

 

Last Updated 11/19/08