Foreword by Ronald Coase, Nobel Laureate in Economics
Through the eyes of an inventor of new markets, “Good Derivatives: A Story of Financial and Environmental Innovation” tells the story of how financial innovation – a concept that is misunderstood and under attack - has been a positive force in the last four decades. If properly designed and regulated, these “good derivatives” can open vast possibilities to address a variety of global problems. Filled with provocative ideas, fascinating stories, and valuable lessons, it provides both an insightful interpretation of the last forty years in capital and environmental markets and a vision of world finance for the next forty years.
Richard L. Sandor is chairman and chief executive officer of Environmental Financial Products LLC, which specializes in inventing, designing, and developing new financial markets with a special emphasis on investment advisory services. EFP was established in 1998 and was the predecessor company and incubator to the Chicago Climate Exchange (CCX), the European Climate Exchange (ECX) and the Chicago Climate Futures Exchange (CCFE). Dr. Sandor was honored by the City of Chicago for his contribution to the creation of financial futures and his universal recognition as the "father of financial futures.” In October 2007, he was honored as one of TIME Magazine’s “Heroes of the Environment” for his work as the “Father of Carbon Trading,” and in October 2012 he was presented with the World Federation of Exchanges Award for Excellence. Dr. Sandor is a Lecturer in Law at the University of Chicago Law School, a Visiting Fellow with the Smith School of Enterprise and the Environment at the University of Oxford, and a Distinguished Professor of Environmental Finance at Guanghua School of Management at Peking University.
Watch Richard Sandor speak to TEDxWallStreet on October 30th, 2013:
Arguments against cap-and-trade -- legislation designed to reduce greenhouse gas emissions--generally boil down to a few key points:
CHICAGO, Oct. 28, 2013 - Dr. Richard Sandor, renowned financial innovator and entrepreneur, on Friday accepted his award as Chevalier dans l´ordre de la Légion d´Honneur (Knight in the French National Order of the Legion of Honor) from François Delattre, France’s Ambassador to the United States, in a ceremony in Dr. Sandor’s home. The award, conferred upon Dr. Sandor by decree of the President of France, is the highest decoration granted by the French government.
First announced in July, the award acknowledges Dr. Sandor’s accomplishments in the field of environmental finance and carbon trading as well as his personal commitment and contribution to the promotion of French-American friendship. In bestowing the award, the French government focused on Dr. Sandor’s pioneer work in the design and implementation of innovative and flexible market-based mechanisms to address environmental problems, particularly to mitigate climate and environmental risks and to generate added value from a sustainable use of ecosystems.
As he presented the award, Ambassador Delattre said: “A man of great vision, you are driven by three main passions: innovation, environment and culture. France, which is at the forefront of the battle in favor of sustainable development, would like to recognize your accomplishments in the field of environmental finance and carbon trading.”
Dr. Sandor said: “I am extraordinarily honored to accept this award from the distinguished Ambassador on behalf of the French Republic. My interest in France goes back to early childhood, inspiring what has become a life-long interest in the country and its culture. I had the privilege of later working in France in environmental finance. To be recognized for the impact these innovations had on French-American relations is truly humbling.”
The Legion of Honor was created by Napoleon Bonaparte in 1802 to reward extraordinary accomplishments and outstanding services rendered to France.
Dr. Sandor is chairman and chief executive officer of Environmental Financial Products LLC, which specializes in inventing, designing, and developing new financial markets. EFP was established in 1998 and was the predecessor company and incubator to the Chicago Climate Exchange (CCX), the European Climate Exchange (ECX) and the Chicago Climate Futures Exchange (CCFE). He is also a Lecturer in Law at the University of Chicago Law School, where he teaches a course on “The Law and Economics of Natural Resource Markets”.
The City of Chicago has honored Dr. Sandor for his contribution to the creation of financial futures and his universal recognition as the “father of financial futures.” In October 2007, he was honored as one of TIME Magazine’s “Heroes of the Environment” for his work as the “Father of Carbon Trading.” He is also the author of “Good Derivatives: A Story of Financial and Environmental Innovation.” The book, now in its second printing, has just been published in Chinese by People's Oriental Press.
Dr. Sandor is also a visiting fellow with the Smith School of Enterprise and the Environment at the University of Oxford; a distinguished professor of environmental finance at Guanghua School of Management at Peking University, and a member of Guanghua's International Advisory Council. He is also a Senior Fellow at the Milken Institute.
Dr. Sandor received his Bachelor of Arts degree from the City University of New York, Brooklyn College, and earned his Ph.D. in economics from the University of Minnesota in 1967. In 2004, he was the recipient of an honorary degree of Doctor of Science, honoris causa, by the Swiss Federal Institute of Technology (ETH) of Zurich, Switzerland for his pioneering work in the design and implementation of innovative and flexible market-based mechanisms to address environmental concerns.
One of the founding fathers of the modern futures industry has described Europe's stuggling emissions trading scheme as performing 'brilliantly', saying it has far exceeded its goal.
More people in India have access to cellphones than to basic sanitation. Meanwhile, more than 7,000 villages in the northwestern part of the country suffer drinking water shortages as the water table in the breadbaskter region continues to drop. And the same story can be told all over the world, according to participants of a water conference at Columbia University on March 28th.
In recent weeks, two seemingly disparate events have revived the conversation about climate change policy in the U.S.
One was the unprecedented damage caused by Hurricane Sandy. The other was the “fiscal cliff,” with politicians scrambling for new sources of revenue to help offset major spending cuts or tax hikes. Suddenly, talk of a “carbon tax” has become fashionable inside and outside the Beltway. It is both a revenue-raising policy and the perceived solution to a climate crisis that may be creating massive natural disasters. Although this seems enticing, is a tax the best—or only—solution in the long run?
The alternative to a carbon tax is emissions trading, or “cap and trade.” In the early '90s, the U.S. Environmental Protection Agency's program to combat acid rain was the first large-scale implementation of cap and trade, and it was a clear environmental and economic success. According to the EPA, it reduced emissions of sulfur dioxide by 64 percent from 1990 levels at a fraction of the anticipated cost. It was estimated in 2010 that 20,000 to 50,000 lives are saved annually by the reductions in the number of diseases associated with acid rain.
We are pleased to announce a 2nd edition printing of Dr. Richard L. Sandor's recent book, "Good Derivatives: A Story of Financial and Environmental Innovation." To be released 1st quarter 2013. We are also pleased to announce the Chinese translation of Dr. Sandor's book, scheduled to be published in China in August, 2013.
Richard Sandor is a passionate believer in the power of finance to change the world for the better. Simon Creasey talks to the veteran U.S. economist about his vision for the future.
Over the course of his illustrious career US economist Richard Sandor has racked up numerous accolades. Treasury & Risk Management magazine called him one of the 100 Most Influential People in Finance in 2005, Time magazine named him a ‘hero of the environment’ in 2007, and in 2009 he was awarded Ernst & Young’s Entrepreneur of the Year award in the green category.
But the title that this titan of financial innovation is more commonly known by is the ‘father of financial futures’. It’s a moniker he earned for his pioneering work in developing the first interest rate futures contract in the 1970s, when he served as chief economist and vice-president of the Chicago Board of Trade. It marked the start of a distinguished career in finance, that saw Sandor go on to play a key role in the creation and ascendancy of the London International Financial Futures & Options Exchange (LIFFE) and the invention of emissions trading – he’s also been called the father of carbon trading.
Now with a new book about ‘good derivatives’ to promote and a series of talks lined up in the UK, square mile caught up with the white knight of finance to gauge his thoughts on the current state of the banking industry and find out what the futures markets of tomorrow will look like.
A Bad Rap.
It’s fair to say that the past five years haven’t been kind towards the derivatives model that Sandor worked so hard to establish. Many politicians and economic commentators have blamed the instruments for the world’s current financial woes because of the perception they engendered an irrational attitude towards risk taking. However, Sandor argues that they’ve been unfairly given a bad rap.
“The model that began in Chicago was extended to well over 78 derivative exchanges in 36 countries, all of which performed flawlessly during the great recession,” counters Sandor. “In the most widely used one – the interest rate derivative – no bank failed because of interest-rate risk. It was managed intelligently, and even in the very rough period in the 1980s these instruments worked perfectly. That’s really the message of my new book, because these good derivatives have been in existence for 35 years and they‘ve performed flawlessly.”
The book in question is Good Derivatives: A Story of Financial and Environmental Innovation and is Sandor’s considered response to the bad press that derivatives have attracted since the economic meltdown of 2007. Sandor was encouraged to write the book by his mentor Prof Ronald Coase, a British-born economist and Nobel prizewinner. “He was of the opinion that I should tell the story of financial innovation for several reasons. One because economists assume financial innovations occur easily – that they exist like spontaneous combustion. In the case of the markets I’ve been involved in they generally take 10-20 years to really develop.
“Professor Coase also felt that economists and policymakers needed to understand all of the mechanics of developing financial innovation and the process of financial innovation in order to facilitate future development in the finance sector which would serve social and public benefits.”
A good example of an innovative financial futures market that is expected to develop in the coming years is water quality and quantity. Sandor is a firm believer that fresh water will become the crude oil of the 21st century owing to its scarcity – fresh water accounts for less than 1% of the global water resource – and that a futures market for water would be an effective way of managing the resource.
“The cap and trade model can be applied to the water sector,” believes Sandor. “The result will be more effective conservation – having water flow to its highest and best use and conserving it in areas where it is short and ensuring that it’s not used frivolously.”
The same principle applies to natural gas, which Sandor believes will be a transformational event. “We’re already seeing its profound effects in the US, where there are lower CO2 emissions as more natural gas is adopted. I don’t think it’s a permanent solution, but I do think that it will lead to reduced CO2 emissions, cheaper power and less pollution in the next 40 years and will be the bridge fuel to many other fuels.”
As for what direction other future markets might take, Sandor has a few ideas in mind. “It’s in those areas that economists call ‘public good’, like air, water and endangered species. So it could be used in preserving rainforests and things of that nature, or it could be used in medicine. There’s a whole raft of businesses that would benefit from a price signal to improve efficiency – and this really is all about the power of price to change behaviour.
“If you and I go to an all-you-can-eat buffet dinner and an open bar we’re going to eat and drink more than we would otherwise. But if you put a price on something it serves as an important piece of information and changes the nature of resources. “Where problems exist is when there are no price signals directing human beings to efficiently use scarce resources. That’s the key to financial innovation.”
Solving Global Problems
Sandor expects to see much more financial innovation from the emerging markets, which seem much more receptive to the concept that, if properly designed and regulated, good derivatives can open up vast possibilities to address a variety of global problems.
“The Chinese are embracing markets and financial innovation,” says Sandor. “They understand how important it is to have a vibrant financial sector that will encourage and foster growth in the production of real goods and services.” He believes that many Western countries have lost sight of the fact that it was the development of innovative financial instruments that helped emerging market nations to grow in the first place.
“How much better off is the world today because of the financing that exists, because of financial innovation? Whether it was the financing of the industrial revolution, the ability to raise capital, junk bonds that facilitated the developing of CNN and the cell-phone and the breaking of the telephone monopolies. Whether it’s high-yield bonds, good derivatives – we’ve created jobs. And while people in the US have criticised junk bonds, China awaits a junk bonds market.
“While we criticised crude oil markets a year ago when prices were $140, China is working on establishing a crude oil market. While we’re criticising derivatives, they [China] are now the fastest growing sector in the world for derivatives. Every time we get a political backlash it falls on deaf ears in those countries with high-growth rates.”
Not only does Sandor believe that good derivatives will enable emerging nations to enjoy strong financial growth, he also sees them as a potential cure to the problems that have blighted the banking industry in the Western world in recent years.
“We need to imitate the good derivatives model,” he says. “Transparency is critical, markets are critical – the industry can and should take a lead. Look at the Libor question. The industry should be looking and saying ‘wait, is there a market-based model as opposed to a survey to determine Libor?’
“If there were a transparent market-based rate perhaps that scandal wouldn’t have happened. Had it been traded on a regulated, transparent market and had that signal been given electronically and generated by market transactions, this would not have occurred.”
Although he accepts the industry should shoulder some blame for the excesses that occurred in the financial world, Sandor believes many of the attacks are baseless. He cites the example of the recent drought in the US and the impact it is having on food prices.
“I am sure that at some point in the future I will get up one day and read in the Financial Times, the Wall Street Journal or the New York Times that speculators have driven up food prices. We will forget the drought. We will forget the misguided public policy on ethanol that drove farmers to put 40% of the biggest crop in America into renewable energy and not food. The politicians won’t blame themselves and nobody is going to blame the weather or climate change, so they’re going to turn to a natural victim – speculators. “I live fearfully that the inappropriate use of words like derivatives and speculation by policymakers, by the fourth estate, by businessmen, will create – and does periodically create – a witch-hunt.”
New Financial Models
Despite the encroaching years – he’s 71 – Dr Sandor shows no sign of slowing down, although he admits that defending the financial innovations that he helped to create requires “far more skills of pugilism than it did in the past”. In addition to his role as chairman and chief executive of US-based Environmental Financial Products, which specialises in inventing, designing and developing new financial markets, he continues to teach at the University of Chicago and he’s already started working on his next book.
“It’s on environmental instruments as a new asset class and will be published by the Chartered Financial Analyst Institute to show how environmental goods and services can be used as a tool in financial analysis for corporations,” he says.
He’s also actively exploring potential avenues for innovative financial models that will aid in the enrichment and betterment of mankind. “We’re inventing new financial instruments at the moment that for obvious reasons I can’t talk about,” says Sandor. “We think that the best is yet to come.”
Perhaps one of the country's most influential "environmentalists" isn't known as an environmentalist at all. He doesn't study wild animals or raise local food. He doesn't write sensitive essays in the shadows of tall trees, or assail whaling ships aboard motorized Zodiacs.
No. He wears fedoras and collects photographs of world leaders. He is a financier named Richard Sandor. He was chief economist for the Chicago Board of Trade. For more than 40 years, Sandor has worked at the center of financial and environmental markets.
In Good Derivatives: A Story of Financial and Environmental Innovation, Richard Sandor, PhD has written a rich compelling first-person narrative of the development of financial futures and environmental markets over the past 40 years. With personal stories describing both failures and successes, Dr. Richard Sandor engages us with details that expand our knowledge of the capacities and limitations capital markets present to us in our efforts to finance climate change mitigation and natural resources conservation.
Whether one supports financing climate change mitigation and natural resources conservation via tax, cap-and-trade, government fiat, or are otherwise disinterested, Good Derivatives: A Story of Financial and Environmental Innovation is a must read for the simple reason one can gain a greater appreciation of the thought processes, logic, and vocabulary used by financial innovators that directly led to the creation of the Chicago Climate Exchange, the European Climate Exchange, the Chicago Climate Futures Exchange and the Tianjin Climate Exchange.
One who has carved his reputation on his ability - and dogged willingness - to assemble functioning market systems out of disparate pieces, Richard Sandor believes that to understand something, you need to appreciate how the parts make up the sum.
When financial people talk about market makers, they usually mean specialists whose job is to provide bid and offer quotes.
Richard Sandor is not that type of market maker. When he makes a market, he's actually making it from scratch, lobbying legislators, writing rules, educating investors and selling the product, so that all those other market makers have somewhere to work.
"To me, drawing a supply and a demand curve and putting it on a horizontal and vertical axis, and then drawing lines that show the equilibrium quantity and price is the end point," said the man who has been called the father of financial futures. "But the real important thing is how do you build this web of institutions, politics? What challenges me is that complex web of sociology, regulation, legislation, contract design, building of an organisation, electronic trading platforms, all of those things that get to the equilibrium price.
Singapore is an ideal testbed candidate for innovative financial systems such as water markets, financial futures pioneer Richard Sandor said at a lecture on Thursday.
On the sidelines of the same event, Singapore Exchange (SGX) chief executive Magnus Bocker said new derivative products aimed at helping to hedge risks in the energy sector are still probably one to two years away following the bourse's investment in Energy Market Co (EMC).
Mr Sandor, who helped to create the first financial futures in the 1970s and has since dedicated his efforts to creating environmental exchanges and products, said Singapore has the potential to be a key player in testing financial innovations.
Singapore might not have a carbon tax regime yet but being a financial hub, it might be poised to be a centre for water and carbon trading. This is according to carbon trading pioneer Dr Richard Sandor, who was speaking at a Singapore Exchange lecture.
He said that Singapore’s infrastructure as an international financial centre with the largest market for equity futures makes it suitable to become a trading centre for carbon tax credits. Dr Sandor said this form of permit trading will help countries to meet their obligations to reduce carbon emissions.
“It Singapore got enough carbon footprint it could participate with countries like Australia in some kind of international agreement in the region,” he said. “By itself, it could probably be a market, but not a large market.”
Experts said the recent move by the SGX to acquire a 49 per cent stake in the country’s Energy Market Company may be seen as taking a step closer towards this development. EMC operates the National Electricity Market of Singapore – the country’s market for wholesale electricity trading.
Supporters of sustainable energy think Singapore would make an ideal carbon emission trading centre.
Sustainable Energy Association of Singapore’s chairman Edwin Khew said: “A lot of sustainable or renewable projects within the region is around Singapore. It is the fastest growing area particularly for renewable projects that Singapore fits well as a centre to trade carbon.”
In Singapore, the government has embarked on various measures to reduce emissions and it is expected to reach 77.2 million tonnes by 2020. So far, carbon emissions have been reduced by 7 per cent to reach 11 per cent below the 2020 business-as-usual levels.
Singapore may not have a carbon tax regime yet but being a financial hub, it may be poised to be a centre for water and carbon trading.
This is according to the inventor of carbon trading, Dr Richard Sandor, who was speaking at a Singapore Exchange (SGX) lecture.
Governments around the world are attempting to cut carbon emissions and reduce the effects of global warming.
Regional countries are reassessing their entire energy policy to be in line with global demands to cut carbon emissions.
Japan and Australia have already introduced carbon tax.
Meanwhile, South Korea has made low carbon, green growth a national priority.
While Singapore is still considering its options in this area, it may be ready to play a part in promoting the trading of such product.
Singapore's infrastructure as an international financial centre with the largest market for equity futures makes it suitable to become a trading centre for carbon tax credits.
Dr Sandor mentioned in a special lecture this form of permit trading will help countries to meet their obligations to reduce carbon emissions.
Singapore is a natural place to set up a water derivatives exchange and it is in the country's interests to do so, a financial innovation expert said.
Mr Richard Sandor, known as the father of carbon trading, told reporters on the sidelines of a lecture that Singapore could become the first water exchange in the world, supported by its strong water services industry and solid regulations.
Having a water exchange would encourage conservation and more efficient use of the resource, he added, which is integral to economic development. Minister of State for Finance and Transport Josephine Teo, who was the guest of honour at the lecture, said Singapore is always keen "to look at introducing new ideas".
Singapore would be a natural setting for a water derivatives exchange and it's in country's interest to set one up, the Straits Times reported, citing carbon-trading pioneer Richard Sandor.
Singapore could become the first water exchange in the world, supported by its water services industry expertise and solid regulations, the Straits Times quoted Sandor saying. Having a water exchange would encourage more efficient use of the resource, he said.
With the onset of the global recession, the public reputation of the finance sector took a major hit.
So naturally, economist Richard Sandor said, it's difficult for some to view the sector as a potential driver of public good. Sandor spoke recently at the University of Oklahoma.
"Right now, finance ranks with the world's oldest profession in terms of world recognition," Sandor said.
Often regarded as the "father of financial futures," Sandor was involved in the creation of interest rate futures while he served as vice president and chief economist of the Chicago Board of Trade in the early 1970's.
Libor is giving derivatives a bad name.
The London Interbank Borrowing Rate (Libor) and its calculation are subject to worldwide investigation. In fact, one bank has already paid over $450 million to settle rate manipulation allegations. Others are being investigated and may be implicated. Currently, estimates of damages resulting from the scandal range from $8 billion to $176 billion.
Libor is an interest rate at which banks will lend money to each other for different time periods (i.e. Overnight, 1-month, 3-months, in different currencies (e.g. the U.S. dollar, Euro etc.). The most popular is the dollar-based Libor. Libor is important benchmark for interest rates on mortgages, credit cards, swaps and the multi-trillion dollar financial derivatives industry including corporates and state and local governments. An accurate Libor has huge implications on our everyday lives. But there is a big problem with how we determine this rate.
Commodity derivatives trading in water? It's not as far-fetched as it sounds, and it may become part of the energy business soon.
Water supply is critical to 89% of all electricity generation worldwide, so energy companies need to calculate "water risk" as part of overall business risk. Upmanu Lall, Director of Columbia University Water Center, said key to managing these risks is quantifying them, so businesses can create "actionable agendas."
But quantification could also create new and profitable business opportunities including commoditized water markets, Richard Sandor, Chairman/CEO of Environmental Financial Products, told a Growing Blue conference in Washington DC recently. Growing Blue is a resource site initiated by Veolia Water, with members ranging from The Nature Conservancy to IBM.
From the recent drought to the needs of a growing society, water is now a pressing issue that impacts our economy and way of life. Just how important is the nexus between water and the economy?
On September 18, 2012, a panel of experts from a number of fields gathered in National Geographic’s Washington DC headquarters to answer this question. The panel covered the impact of water scarcity on the nation’s economy and options for stimulating economic growth by focusing on water management.
The event was hosted by GrowingBlue in line with our mission of helping municipalities, businesses and consumers gain a better understanding of the water challenges of today and tomorrow. You can read and download the power point discussions here.
And during the event, IBM released its new study findings on smart cities and water. A copy of that report can be found here.
Short video clips of each speaker are available. Click here to see Dr. Richard Sandor, economist, CEO of Environmental Financial Products and senior fellow at the Milken Institute. Continue to the GrowingBlue website here, for more on this event.
South Bend, Ind., avoided $120 million in upgrades and conserved millions of gallons of water by becoming one of the first cities on the globe to use cloud computing to manage its water systems.
In Oregon, local officials cooled down water from wastewater plants by planting trees near riverbanks rather than using cooling equipment, lowering investment costs at the same time.
The Department of Energy, meanwhile, is working with governors and transmission officials in Texas and the western United States on a multi-year computer project to find the best locations for new power plants faced with growing scarcity in nearby water resources to cool down their operations.
These examples underscore the many options available to alleviate a growing global water crisis exacerbated by climate change, water experts said yesterday at forum in Washington, D.C., sponsored by Growing Blue, a group created by Veolia Water in consultation with the United Nations, Columbia University and water conservation groups. "Water is posed to be the commodity of the 21st century," said Richard Sandor, an analyst at Environmental Products, who also founded the Chicago Climate Exchange.
The World Federation of Exchanges (WFE) announced today that the recipient of the WFE Award for Excellence this year will be Dr. Richard Sandor, chairman and CEO of Environmental Financial Products LLC (EFP). Dr. Sandor was selected for this Award in recognition of his work at the epicenter of environmental and financial markets for more than four decades.
The WFE Award for Excellence is presented annually in recognition of an outstanding contribution to the advancement of regulated exchange markets. The Award salutes innovation and improvement in the exchange industry’s operations, which leads to greater understanding and better usage of the world’s capital markets.
Water is very much on people’s minds today. From countries such as the United States in the west, to India and China in the east, populations are faced with threats generated by water quality and quantity issues. It is the subject of discussions in continents such as Africa and states like Texas. As these problems become exacerbated, policymakers, businesses and not-for-profits are starting to discuss the potential for market-based mechanisms to become an important tool to address this problem.
Water is one of the most essential ingredients for sustaining life. From food production to the basic needs of hydration and hygiene, water is critical. Also increasingly important is the connection between water and energy. We need energy to move water and in many cases we need water to generate energy. Because of that, industrial and other types of productive activity are intrinsically connected with water as both an input of production or as an indirect component of energy consumption.
Richard L. Sandor was ahead of the curve in identifying the next big trend in finance, so many entrepreneurs are taking note of his enthusiasm for growth in green technology startups, particularly in the Midwest.
Mr. Sandor, 70, is widely knowns for his trailblazing works in the 1970's, when he developes the first interest rate futures contract and also served as chief economist and vice president of the Chicago Board of Trade. More recently, he's attempted to combine climate change concerns with financial forces.
When you think of trading the steepening or flattening of the yield curve, you have Richard Sandor to thank. He was at the forefront of designing GNMA futures in the early '70s. He is considered the father of financial futures.
I've known Richard for several years now and I often see him speak at conferences such as the Milken Institute's Global Conference, among others. His new book, Good Derivatives, is a memoir that I think you'll find very interesting. It's filled with his great anecdotal stories as well as a depth of history that only someone with 40 years of experience like he has.
Universal "Father of Carbon Trading” and “Father of Financial Futures”, Richard L. Sandor, The following report by Hexun Futures is based on the “Ninth Shanghai Derivatives Market Forum” held in Shanghai last week, from May 28 -29. The topic of the forum was, “Innovation and Services- the Revolution and Liberalization of China’s Futures Markets.” Hexun acts as the sole financial portal that provides a live broadcast of this forum.
Universally regarded as the father of carbon trading and financial futures, Richard Sandor expressed the following view to a reporter from Hexun: Borrowing from the experience of other countries, the presence of a large number of market-making companies provides the Treasury bond futures market with sufficient liquidity. In fact, 30-40% of the liquidity in German government bond futures is provided by the Chicago market makers. Introducing bond futures to the market-making system is therefore highly recommended.
According to available data, the issuance of treasury bonds in China reached 1.7 trillion yuan in the past two years, with a balance of approximately 7.7 trillion yuan. The bonds held by banks accounts for 70% of this number, while the majority of the remaining is held by insurance companies, brokerages, pension funds and trust funds. Since February of this year, with the unlocking of the capital markets, Treasury bond futures trading activity has been high and stable.
Regarding the question of how to ensure the liquidity of government bond futures, Richard L. Sandor pointed out the importance of educating market participants. This includes educational forums for exchanges and futures companies, informing participating institutions, and marketing to individual investors. It also involves explaining the workings of treasury bonds futures to investors so that they can thoroughly understand the risks and opportunities of that market, thus attracting market-makers. “Speaking from my personal experience, an effective way of familiarizing the market with a new product is by introducing it through university curriculums.”
In other countries, according to Richard L. Sandor, the banks are the main liquidity providers for Treasury bond futures. This is further complemented by individual over-the-counter deals between companies. “I believe that market makers are essential in providing liquidity to the Treasury bond futures market. In China, it matters very little whether this role is played by banks or other financial institutions.”
- Author Liu Dong
Richard Sandor argues that while exotic financial products played a large role in the 2008 economic collapse, there are ways to harness the power of the financial products industry to benefit society. He also talks about the creation of the Chicago Climate Exchange, which he spearheaded. This event was also hosted by the University of Chicago.
A leader in environment-friendly innovation offered insight to students and others at Ohio State, as he discussed his journey from college to running an environmental empire. During a Tuesday visit to campus, Richard Sandor, a forefather in environmental finance, spoke to a class, presented a lecture and held a book signing.
The description “good derivatives” is not something most people attribute to financial risk management instruments. Many believe, rightly or wrongly, that the misuse of derivatives was one of the main reasons why the world continues to be in economic turmoil. Richard Sandor, former chief executive officer (CEO) of the Chicago Climate Exchange (CCX), attempts to set the record straight, as well as writing his autobiography, in this new book.
The Wall Street Shuffle with Dan Cofall and Dan Stewart, podcast with guest Dr. Richard Sandor, "the father of financial futures," and Chairman and CEO of Environmental Financial Products.
There is a right way to do things and a wrong way to do things. When you are headed to a book signing and you have been given an advance copy of the book, the right way to do things is to read the book ahead of time. This is especially true if you happen to be mentioned in the acknowledgements. Or, the wrong way to do things would be to not read the book ahead of time and find out at the book signing that you are mentioned in the book, in the acknowledgements.
Yesterday I had lunch with Dr. Richard Sandor and had to admit that I had not read his book yet. He sent me the galley in March (while I was traveling extensively) and I had yet to read it. I did take a quick look at it before heading to the book signing Monday and noted that my associate Jim Kharouf was mentioned in the book on page 466.
Dr. Sandor’s “Good Derivatives” is going to be a great read, after having read the first couple of chapters last night. Doc, as he is affectionately known, shared the story of his childhood and early years at the beginning of the book. Here are just a couple of facts from the book: Doc and a friend had a winning record playing chess versus a boy named Bobby Fischer. Yes, that Bobby Fischer. He met Fred Arditti in Berkeley. Arditti recommended Doc take a look at commodity trading. Doc writes extensively about trying to set up an electronic commodity exchange in the late 1960s and early 1970s. He sounded like a young Jeff Sprecher, but for coconut oil. A class he taught on innovation would visit the R&D offices of Hewlett Packard and Bill Hewlett would even address the class.
I always get energized after speaking with Dr. Sandor. He is just full of positive energy and vigor for our markets. I am going to meet with Doc every day by reading “Good Derivatives” and get recharged. With all the negative news about our markets and the challenges we face, “Good Derivatives” promises to be a shot in the arm of positive perspective on exchange traded markets and those that share its values.
I tell my scouts the right way to do things is to admit your mistakes. And now I have admitted this one. Only 47,000 more to go.
- John J. Lothian
Today's guest is Dr. Richard Sandor, “the father of financial futures,” and Chairman and CEO of Environmental Financial Products. Dr. Sandor discusses his new book “Good Derivatives,” and his storied career. He distinguishes between regulated and unregulated derivatives, discusses what it takes to create a new market, and his involvement in the issue of acid rain.
Richard Sandor is a man who does not let failure get in the way of his ambition. From his early days as an academic to the establishment of the world's leading climate exchange, his story, recounted in his newly released autobiography Good Derivatives: A Story of Financial and Environmental Innovation, stands testament to what can be achieved through vision and perseverance.
Richard Sandor is not a household name but he should be. He is quite frankly one of the most important people in finance today given his 40 years of innovation. He is widely regarded as the "father of financial futures" for his pioneering work in interest rate futures.
"Richard Sandor is a true genius. That is obvious. For creating the world's most popular class of futures contracts? For persevering with climate projects despite headwinds of incredible force and dysfunction? Or for marrying Ellen? All of the above but more so, in my view, for marshaling teams superbly. I enjoyed the pride of membership on one of them. If he ever seeks your help, say "yes" and do it fast!"
Philip McBride Johnson, Past Chairman of the Commodity Futures Trading Commission
"No one has more insight into the power of markets to achieve environmental objectives than Richard Sandor. In Good Derivatives he combines his depth of experience in the marketplace with his passion for telling stories. At the heart of this work is his belief that innovation—financia| innovation in particu|ar—has helped make the American economy supreme. He not only sheds light on the evolution of financial innovation through the different products and methods that became available, but also through the role he played using markets to shape policy goals that he cares about. Sandor examines how the marketplace and trading can create value for society, and ultimately drive environmental ends in a positive direction. This is a strategy that defines his lifetime of work."
U.S. Senator Jeff Bingaman (D-NM), Chairman of the U.S. Senate Committee on Energy and Natural Resources
"This book by Dr. Richard Sandor powerfully reminds us that the well—being of any economy is directly related to its ability to be innovative. Sandor, with his inventive mind has himself helped to create new markets which have not only strengthened our economy but have also given us new ways to achieve important environmental and social goals. From his example we learn that the creator of new markets must not only excel as an innovative thinker but also as an effective advocate and teacher to policy makers and the general public. His life story, demonstrates what one talented and committed person can accomplish in a free society.” David L. Boren, President, The University of Oklahoma Longest Serving Chair of the US Senate Select Committee on Intelligence "A fascinating story from a most eloquent storyteller. A must read for anyone interested in the complex relationship between financial innovation and low carbon economic growth."
Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC)
"This book represents the work of one of the world's most brilliant, inquisitive, and visionary minds. Richard Sandor knows this subject as an economist, a trader, an executive, an entrepreneur, but most of all, as a teacher. No one else in the world could have written this book. There is lots of intrigue in financial markets, especially in Chicago. He lifts that veil, while also explaining what derivatives are all about."
Ambassador Clayton Yeutter, past Secretary of the U.S. Department of Agriculture and U.S. Trade Ambassador
"Richard Sandor quotes Schopenhauer's comment that all important truths go through stages when they are ridiculed and then opposed. Today even the existence of climate change is ridiculed by some, and serious action to cap the gases that cause it is forcefully opposed by others. Richard's account of how the tools of modern financial markets can be turned to environmental use reminds us that there is a way forward, and the truth, founded on the laws of economics, that the environment can be saved if it can be commoditized will become regarded as self-evident."
Henry Derwent, President/CEO International Emissions Trading Association
At a time when markets around the world are struggling to find secure footings, Richard Sandor, through an artfully crafted story of his career, reminds us that financial innovation isn't all bad and that risk entails, well, risk. Written for both the financially literate as well as the challenged, Sandor has recapped a career that blazed new paths in exchanges in a readable and informative way. Not only does "Good Derivatives" show how derivative and financial innovations can create market value, in the book Sandor demonstrates how careful planning, perseverance and understanding of the climate in which you operate are the keys to success. An important read for today's policy makers.
Christine Todd Whitman, Former Governor, New Jersey
"The evolution of derivatives is a fascinating tale and no one tells it better than "Doc" Sandor, one of the most dynamic intellects this industry has ever seen. Starting with his early days of creating electronic trading at the University of California, Berkeley and ranging through his leading role in the creation of financial futures and the development of a global market for emission credits, Richard spins a wonderful story that is difficult to put down. I recommend this book to anyone who is curious about capital markets and the power of innovation to transform the world."
John M. Damgard, President, Futures Industry Association
Join the Goizueta Business School community as they host a discussion with Dr. Richard L. Sandor on his newest book Good Derivatives: A Story of Financial & Environmental Innovation. He will touch on what exactly 'good derivatives' are, how they are created and how they have performed. Along with examples of financial futures and environment and the next 40 years in finance. The discussion begins at 5pm at the Goizueta Foundation Center, Room GBS W300 on 1300 Clifton Rd Northeast.
The Weidenbaum Center on the Economy, Government and Public Policy, Washington University in St. Louis, will be hosting a talk by the “father of financial futures” Richard L. Sandor. Focusing on his newest book Good Derivatives: A Story of Financial and Environmental Innovation, which concentrates on the world’s first exchange to facilitate the reduction and trading of all six greenhouse gases. Washington University’s International Center for Advanced Renewable Energy and Sustainability will be cosponsoring the event and a reception will follow in the atrium of Whitaker Hall.
Hosted by the Center for Financial Markets and Policy, the McDonough School of Business at Georgetown University is pleased to annouce a lecture by Dr. Richard L. Sandor on his book Good Derivatives: A story of Financial and Environmental Innovation from 5:00pm-7:00-pm. Reception and book signing to follow.
The University of Memphis will host Richard L Sandor for a lecture on Good Derivatives from 8:30am-10:00am. Good Derivatives is filled with provocative ideas, fascinating stories, and valuable lessons, it provides both an insightful interpretation of the last forty years in capital and environmental markets and a vision of the world finance for the next forty years. This event is open to the public, but please RSVP to email@example.com .
Join The University of Toronto and Richard L. Sandor for his lecture in the Rotman Master of Finance Speaker Series.
NSE cordially invites you for an interactive session with Richard L. Sandor on his new book, "Good Derivatives: A Story of Financial and Environmental Innovation." Held at the NSE Auditorium, Bandra-Kurla Complex, Mumbai on January 29th from 5:00pm - 6:00pm.
The Finance Club at Harvard Business School is pleased to host Richard Sandor for a lecture on Good Derivatives.
MIT Sloan Sustainability Speaker Series presents author Richard L. Sandor. Sandor is known for asserting that the next financial revolution will be in the convergence of financial markets and the environment. Please join the students at MIT to hear a lecture on Dr. Sandor's new book, "Good Derivatives: A Story of Financial and Environmental Innovation."
The George Washington University School of Business is pleased to host Richard Sandor for a lecture on Good Derivatives.
Hosted by the Green Business Club and co-hosted by the Columbia Investment Management Assocation and the Sales & Trading Club, Columbia University is pleased to host Richard Sandor for a lecture on Good Derivatives.
Dr. richard Sandor will give a first-hand account of his experiences as an inventor of new markets in interest rates, air and water. Sandor provides unique insights into the process of creating these new financial markets. Covering his successes and failures, including an attempt to start an all-electronic exchange in the late sixties, his talk will cover the efforts to build support for these new inventions in places like Chicago, New York, Paris and how their impact is unfolding today in Mumbai, Shanghai and Beijing. Join him at The Smith School of Enterprise and the Environment, University of Oxford.
Dr. Richard L. Sandor will speak on his new book, "Good Derivatives: A Story of Financial and Environmental Innovation." This is a public lecture hosted by the Grantham Research Institute on Climate Change and the Environment and Department of Management.
The Environmental Markets Association is pleased to announce Dr. Richard Sandor as a keynote speaker at the 16th Annual Fall Meeting in Santa Monica, California. All attendees will also receive a signed copy of Dr. Sandor's new book, "Good Derivatives: A Story of Financial and Environmental Innovation."
Join Dr. Richard L. Sandor, author of "Good Derivatives: A Story of Financial and Environmental Innovation" as a keynote speaker for the World Federation of Exchanges 52nd General Assembly and Annual Meeting in Taipei, October 2012.
SGX and NTU invite you to a lecture on Good Derivatives, by Dr. Richard L. Sandor - the 'father of carbon trading,' as a part of their Sustainability Lecture Series. Please join us in uncovering how financial markets can play a critical role in effectively addressing global climate change and other pressing environmental issues.
The Civic Exchange invites you to a lecture on Good Derivatives with Richard L. Sandor at the PricewaterhouseCoopers Executive Conference Centre in Hong Kong.
Richard L. Sandor will discuss the power of financial innovation, as described in his new book "Good Derivatives: A Story of Financial and Environmental Innovation," at Oklahoma University. The event will take place at 6:00pm, starting with a reception and dinner, in the Sandy Bell Gallery in the Fred Jones Jr. Museum of Art.
The IIT Stuart Center for Financial Markets and the IIT Chicago-Kent Institute on Compliance present a lecture by Richard L. Sandor on his new book, "Good Derivatives: A Story of Financial and Environmental Innovation."
Brooklyn College is delighted to invite you to a special event with BC alumnus and renowned financial innovator Dr. Richard Sandor ’62. Named a “Hero of the Environment” by Time Magazine for his work as the “Father of Carbon Trading,” Dr. Sandor’s firm, Environmental Financial Products, invents, designs and develops new financial markets with a special emphasis on investment advisory services. In addition, Dr. Sandor serves as a distinguished professor of environmental finance at Peking University’s Guanghua School of Management and as a lecturer of law at the University of Chicago Law School. Dr. Sandor will discuss his new book, Good Derivatives: A Story of Financial and Environmental Innovation. Book signing to follow the lecture and books will be available to purchase.
Please join Richard Sandor, as he explains his view on how financial innovation and derivatives can have a positive impact in areas of global importance. Contrary to the current popular stigma, Dr. Richard Sandor argues that financial derivatives and market based practices can in fact be a force for good in addressing global issues, particularly with regard to the environment.
The Smithsonian Tropical Research Institute and The Fundacion Smithsonian de Panama are pleased to invite you to the book presentation "Good Derivatives" by Dr. Richard Sandor. Dr. Sandor will provide a presentation of his new book, "Good Derivatives: A Story of Financial and Environnmental Innovation," followed by a book signing.
Much of the blame for the global financial crisis has fallen upon an alphabet soup of financial derivatives. Contrary to the current popular stigma, Richard Sandor argues that financial derivatives and market based practices can in fact be a force for good in addressing global issues, particularly with regard to the environment.
Please join The Chicago Council on Global Affairs with Richard Sandor as he explains his view on how financial innovation and derivatives can have a positive impact in areas of global importance. Good Derivatives will be available for purchase and signing following the program.
Join us as Richard Sandor discusses and signs his new book "Good Derivatives." If you're interested in investments, business innovation and/or the environment, don't miss this program! Through the eyes of an inventor of new markets, Sandor tells the story of how financial innovation--a concept that is misunderstood and under attack--has been a positive force in the last four decades.
The Paulson Institute inaugurated its distinguished lecture series in Beijing, in partnership with the University of Chicago's Beijing Center. Richard Sandor, a pioneer of financial innovation since the 1970s, lectured to an enthusiastic audience on his new book, Good Derivatives: A Story of Financial and Environmental Innovation. The discussion was moderated by Jesse Wang, executive vice president of the China Investment Corporation, China's sovereign wealth fund, and a former official of the China Securities Regulatory Commission responsible for futures. A former chief economist of the Chicago Board of Trade, widely recognized as the father of financial futures, Sandor pioneered the first interest rate futures contract in the 1970s. He is also the founder of the Chicago Climate Exchange (CCX), the world's first exchange to facilitate the reduction and trading of all six greenhouse gases.
Fudan Thought Leadership Forum, with Richard L. Sandor on his new book "Good Derivatives: A Story of Financial and Environmental Innovation"
Sandor will speak on The Development of Innovative Environmental Financial Derivatives.
Dr. Sandor will join Chicago Society to discuss how well-regulated, transparent markets can address a wide variety of global issues from environmental degradation to social reform. He will address the role of financial instruments in the global economy, arguing that financial innovation has the potential to be a powerful force for good.
When Dr. Richard Sandor began as a young economist at the Chicago Board of Trade, little did he realize that his contributions to financial innovation would revolutionize markets. The founder of the Chicago Climate Exchange has a new book about financial innovation and lessons learned from 40 years of Good Derivatives that he believes could spur economic growth and support environmental protection today. It is an economist’s tale of financial invention, innovation, and the American spirit. Dr. Richard L. Sandor and Dr. Joseph A. Stanislaw discuss “Good Derivatives” at Ohio State University, hosted by OSU and American Electric Power.
Dr. Sandor will discuss his new book, Good Derivatives: A Story of Financial and Environmental Innovation. Reception and book signing to follow.
The Research Foundation of CFA Institute Annual Workshop is designed to enhance investment practitioners’ knowledge, help them understand and apply research, and contribute to their effectiveness in serving their clients. The workshop speakers will draw from work supported by the Research Foundation of CFA Institute, focused on topics of particular interest to practitioners. Richard Sandor will discuss the developing market for carbon trading and environmental assets, and Elroy Dimson will offer a historical perspective on the equity risk premium and provide insights on how various risk factors should be evaluated today.
Financial Innovation has stirred up a hornet's nest of controversy in recent years. But even as we take a look at how to use inventive tools and instruments more safely and responsibly, it's important not to throw out the baby with the bathwater. This panel brings together a group of pioneers in finance: leading experts who designed instruments and markets that have achieved a great deal of good in the world. They'll gather for a candid discussion about the future of the field, including a look at specific industries and social issues that are crying out for financial solutions to drive progress. Panel Speakers: Michael Milken, Richard L. Sandor, Elad Shraga, Myron Scholes and Moderator Glenn Yago.
Join us for a conversation with Richard Sandor about his latest book, "Good Derivatives: A Story of Financial and Environmental Innovation."
This event is free & open to the public, but please register to attend. Books will be available for purchase at the event through the University of Minnesota Bookstore.
Chicago Booth and the University of Chicago Law School proudly present a conversation with M. Todd Henderson, JD '98 professor of law, and Dr. Richard L. Sandor. Professor Henderson and Dr. Sandor will discuss Dr. Sandor's new book "Good Derivatives."
Berkeley was the breeding ground for electronic trading and the commoditization of interest rates in the 1970's. A former Berkeley faculty member, Dr. Sandor has been at the epicenter of environmental and financial markets for more then four decades. He will be speaking on his new book, "Good Derivatives."
The Milken Institute is a nonprofit, nonpartisan economic think tank, whose mission is to improve lives by advancing innovative economic and policy solutions that create jobs, widen access to capital and enhance health. This Forum is part of Milken’s effort to present multiple perspectives on current business and public policy issues.
At this Milken Institute Forum, Richard Sandor will discuss how financial innovation has been a force for good in the last 40 years and how its vast potential can address environmental, health and social challenges in the next 40 years. "Good Derivatives" will be for sale at the Forum, and Sandor will be available to sign copies. Pre-registration is required.