Preface

Summary

This book weaves strands of research that date back more than 20 years, to approximately 1990–1991. Although I worked at a futures commission merchant (that is, a brokerage firm) while in graduate school, that work involved financial futures exclusively. Deciding to leave that business in mid-October 1987 (thereby causing the 1987 crash), first for a stint in litigation support consulting and then on to academia at the Michigan Business School, I worked on research completely unrelated to futures markets. But in spring and summer 1989, the Italian conglomerate Ferruzzi cornered the soybean market in Chicago. The corner, and the Chicago Board of Trade's response to it, resulted in sharp criticism of the exchange. To address this criticism, the CBOT decided to commission an academic study of the grain market delivery mechanism.

My senior colleague at Michigan who was primarily responsible for bringing me there, the late Roger Kormendi, succeeded in wrangling a grant from the CBOT to carry out the study. He walked into my office and said: “I know nothing about commodity markets. You worked in them. Would you be part of the team on this study?” I responded: “Well, I know nothing about commodity futures, but I'm game to learn.”

This nudge completely changed the trajectory of my research, and virtually everything I have worked on since relates to commodities and derivatives in one way or another. My formal training is as an industrial organization economist, and so my research initially focused on trying to understand the causes and effects of market power in commodity markets and commodity derivatives.