This is John Lothian

By John J. Lothian

ELMHURST, IL - (JLN) - When I mentioned the news about my cousin Tom being hired as the new manager of the Lake Geneva Yacht Club ("LGYC") yesterday in JLN, I mentioned Thomas "T" Freytag, a co-founder of Geneva Trading, as a contemporary reference to give it relevance to the normal newsletter fodder. However, the history of Chicago's futures markets and the LGYC have a common founder in Julian Sidney Rumsey.

In fact, the City of Chicago, the Chicago Board of Trade (CBOT), and the LGYC share an intertwined history dating back to the mid-19th century, with the Sheridan Trophy serving as a symbolic link between these institutions.

In 1848, as Chicago was experiencing rapid growth, the CBOT was established to bring order to the city's burgeoning grain trade. The CBOT quickly became a central force in Chicago's economic development, coinciding with the opening of the Illinois and Michigan Canal and the city's first railroad. These transportation innovations positioned Chicago as a major hub in the international grain trade. Shortly before the Great Chicago Fire of 1871, a railroad line to Lake Geneva was completed, allowing Chicago's elite to access their lakeside summer homes by rail.

Julian Sidney Rumsey, a founding member of the CBOT, played a pivotal role in connecting Chicago's business world with Lake Geneva's leisure community. Rumsey served as president of the CBOT in 1858 and 1859, and later became mayor of Chicago at the outbreak of the Civil War. His influence extended beyond Chicago to Lake Geneva, Wisconsin, where he maintained a summer home.

Nathaniel Kellogg Fairbank was the first commodore of the LGYC, president of The University of Chicago board of trustees, a founder and president of The Chicago Club and a founder of the Commercial Club of Chicago. He was also a major trader at the CBOT, where he served as an officer. His company produced soap and baking products. He was also involved in one of the greatest squatting incidents in Chicago when ship captain George Streeter's schooner went aground off Fairbank's property that is now called "Streeterville." There is a Fairbanks Court on the western edge of Streeterville.

In 1874, Rumsey and Fairbank became founding members of the LGYC. That same year, an event occurred that would cement the connection between Chicago's business elite and Lake Geneva's sailing community. On August 31, 1874, Lieutenant General Philip H. Sheridan, a famous Civil War hero stationed in Chicago, visited Lake Geneva.

To celebrate Sheridan's visit, local residents organized a yacht race in his honor. Rumsey's boat, the Nettie, won this inaugural race. The participants had collected about $200 for a trophy to be called the Sheridan Prize, intended as a perpetual award for annual races. The trophy that has been awarded since is modeled after Rumsey's boat Nettie. 

The Sheridan Prize became the genesis of the LGYC. The trophy, along with three trustees chosen to oversee it, marked the formal beginning of the club. This event solidified the connection between Chicago's business community, represented by figures like Rumsey, and the recreational pursuits at Lake Geneva. 

The Sheridan Trophy race at the LGYC is considered the second-longest continually raced sailboat race in the United States, having been established in 1874. It follows the America's Cup, which is the oldest.

The Sheridan Trophy continues to be a prestigious award in LGYC competitions Labor Day weekend every year to this day, serving as a tangible reminder of the historical ties between Chicago's business elite and Lake Geneva's sailing community. This connection, forged in the late 19th century, exemplifies how the economic power concentrated in institutions like the CBOT influenced the development of leisure activities and communities in the surrounding region. 

If you need more convincing, I suggest taking one of the guided tour boat rides from Gage Lake Geneva Cruise Line, where you can hear about all of the 19th century Chicagoans who had huge summer homes on the shores of Geneva Lake. If you are lucky, your captain on one of those cruises might be Captain Jack Lothian, the brother of the new LGYC manager. If your captain is seven feet tall, that is Jack. 

Many members of CBOT and CME, along with their children, have learned to sail at the LGYC and the Geneva Lake Sailing School, founded in 1938. My cub-boat racing instructor was former CBOT bond-pit trader John Porter. Thomas F. Cashman, son of FIA Hall of Fame member and longtime CBOT soybean pit broker Thomas J. Cashman ("TJC"), also learned to sail there. Despite never sailing, TJC was a long-standing club member and part of the Old Guard.

T. Freytag is the retiring commodore (immediate past commodore) of the club and a former president of the Geneva Lake Sailing School. I sailed against his brother Billy and sister Kate when I was a kid. Later, I was a longtime member of the club as well and raced a C Scow with many friends and with my wife Cheryl, served as C fleet captain for a couple of years and served on the board of the Geneva Lake Sailing School, including as treasurer.  

My uncle, Thomas A. Lothian II, who gave me his 1970 wood Johnson Boatworks C-scow when he retired from racing and after I graduated from college, was the commodore in 1974 when the LGYC celebrated its 100th anniversary and the 100th running of the Sheridan Trophy race. He started sailing on Geneva Lake, after first racing in his home state of Ohio, when he and my aunt would stay on the property in Fontana that then belonged to the Glenview Community Church. Some of my earliest memories are from being at the church camp. 

When the church sold the property, my parents bought property in Williams Bay, where the church property caretaker was village president. My uncle also bought a home in Williams Bay. TJC and his family moved in across the street from him and they became good friends and served together on the village board.

In 1973, the Cashmans moved across the bay to a home a couple of houses away from our summer home and TJC coached my older brother Scott in little league. 

T. Freytag's grandfather lived just down towards the lake from the Cashmans and he served as my father's lawyer when my father was president of our lake home subdivision. 

The LGYC has come a long way from Julian Rumsey's days and the founding of the club and the start of the Sheridan Race, but the seeds that Rumsey and Fairbank planted continue to grow through the CBOT and Chicago today.

Standing Out in 1999 Led to a Career Standing Up For The Markets

Twenty-five years ago, in August 1999, I began producing this daily newsletter as a marketing and networking tool to promote my electronic trading brokerage services, Commodity Trading Advisor offerings, and my personal brand.

I was competing with large discount commodity firms that were transitioning to electronic trading, and I needed to market myself and my firm and find a way to stand out, but I didn’t have many monetary resources to do so. Therefore, I had to think outside the box.

My specific goals at the time were to increase the number of my brokerage clients at The Price Futures Group, to raise funds for Defender Capital Management and Hargrave Financial Group, two CTAs I represented, and to elevate my profile amid industry changes that I felt could undermine my career path.

I feared that the introduction of single stock futures could change the face of the industry, potentially making standalone introducing brokers like The Price Group obsolete. I wanted to learn as much as possible about SSFs and share this information. I was also concerned about the impact of electronic trading on open outcry trading and its related careers, and I wanted my friends and colleagues in the industry to be aware of the risks they were facing. Additionally, I worried that backlash from competing brokers over my participation in the ‘wild west’ of the internet—Usenet, the Reddit of its day—might damage my reputation. My hope was to address both my goals and my fears in a positive way that would benefit myself and my community.

My specific strategy for the newsletter was unique. I wanted to experiment with something called a weblog and a concept called viral marketing. The weblog was created in 1997. By combining these two elements, I aimed to create a publication that would gather all the information I could find about the changes occurring in the industry, compile it into a single email, and send it to clients, colleagues, leads, acquaintances, and others. In the early days of the internet I had seen some incredibly successful examples of viral marketing, including one for the online brokerage firm National Discount Brokers that had involved a quacking duck. 

The pace of change in the industry was so rapid in those days that no publication could keep up with the constant flow of news. None of the weekly or biweekly newsletters seemed able to meet the challenge. In the meantime, there was too much risk.

My own risk as the head of electronic trading was increasing as well, since I was with an introducing broker outside of our futures commission merchant, Man Financial. Man Financial was mostly staffed with second-in-command executives from acquired firms who lacked a clear vision for handling the industry’s changes. Too often, when memos from the exchanges landed in their inboxes, they simply went unnoticed, rather than being shared with the rest of the firm and its clients.

I decided to take a proactive approach and seek out the information myself. I would find, aggregate, and compile it with other relevant news and stories I could gather, and then share it with anyone who signed up for my newsletter. I initially sent out a few proactive emails saying, ‘Hey, I have this newsletter; would you like to see it?’ But soon the newsletter took on a life of its own as the viral marketing aspect kicked in.

To differentiate the newsletter from the highly effective spam of the day, I placed my name at the beginning of the subject line, followed by the topic of the first story. The newsletter didn’t have a name initially, but after people began referring to it as The Lothian Report, similar to The Drudge Report, I decided to give it a proper name. Thus, the John Lothian Newsletter was born. This small anti-spam gesture increased the newsletter’s visibility in people’s inboxes and helped turn my name into a brand.

Back then, people’s eyeballs were focused on their inboxes. Websites were cool, and various interesting graphics tools were being developed, but you still needed a strategy to drive people to visit a website. This was a time before iPhones and endless social media apps. Your inbox on your BlackBerry was the Facebook and Instagram of its day.

The word ‘blog’ didn’t enter our modern lexicon until 2004, when Howard Dean ran for the Democratic Party’s nomination for president. He raised a significant amount of money through blogs, and that achievement landed him on the cover of Time magazine, which was still a big deal back then.

When Peter McKay of The Wall Street Journal ran a story about me the day after Christmas in 2002, there was no mention of the word ‘blog’ or even the concept of aggregation. He used the word ‘compendium’ to describe the information in the newsletter.

McKay’s article introduced me to a broader audience on Wall Street and to those interested in the growing business of the exchanges. 

In the earliest days of the newsletter, I compiled it using Netscape, which served as both my browser and email client. After Netscape crashed for the second time just as I was about to send out the newsletter, I switched to Microsoft Explorer and Outlook. I also began using a text editor or notepad to cut and paste all the stories separately from the email client. This approach allowed me to have a backup of the information and also stripped out any formatting, which proved to be very useful.

When I started JLN, Patrick Young had just published his book, Capital Market Revolution, in which my then-colleague at The Price Group, the late Martin Hollander, was acknowledged. I thought that was very cool. At the same time, Young was running two e-zine publications under the name erivatives.com: one was forward-looking, while the other focused on past developments.

While Young’s opinions were always verbosely fascinating, he lacked a viable economic model for his business. Many internet businesses of the day had the same problem. He had taken in investor money, including funds from a former Northern Trust executive, hired staff, and yet had no revenue. Additionally, the information in his publication was often redundant for those who were already reading my daily newsletter. Young’s experience taught me an important lesson: make sure you have an economic model and ensure that it works.

My model for the newsletter was to generate more commission and fee business for me, and it succeeded. My brokerage and CTA business grew, which was increasingly important since I had a wife and three small children at home. However, over time, as I came to be seen more as a journalist and less as a broker, that dynamic changed.

In 2004, for the second year in a row, Patrick Young invited me to the Swiss Futures & Options Association‘s Burgenstock conference in September. Since it was my 15th wedding anniversary, I thought an overseas trip would be a wonderful way to celebrate with Cheryl. However, I needed money to fund the trip.

Anticipating being invited again, I had announced the previous November that the John Lothian Newsletter, which now had a formal name, would be offered on a voluntary pay basis, similar to shareware. If readers found the newsletter valuable, they were asked to pay for it. If multiple people at a firm were reading the newsletter, we assumed it was valuable to the firm and sent an invoice.

On the day I announced the new name and pricing, I happened to have a lunch meeting scheduled with then-CME CEO Craig Donohue. He asked if I had an enterprise pricing schedule for firms with large numbers of subscribers. Bingo! I replied that I would send it over.

The revenue from the newsletter covered our trip to Europe and allowed me to attend the FIA conference in Boca Raton again. I also attended the Options Conference.

Those were some heady days. I was frequently asked to moderate panels. When Eurex and Liffe entered the U.S. market to challenge incumbent exchanges, both requested me to moderate their panels. The Options Conference invited me to moderate the exchange leaders panel for two consecutive years. If you wanted to attract people to your event, you asked me to include details in my newsletter. As my former employer, W. Thomas Price III, said at the time, it was his ‘First Read.’ When we redesigned the newsletter, we named the top section ‘First Read.’

I was meeting industry leaders, exchange heads, and influential figures regularly. One day, Jeffrey Sprecher recognized me in the lobby of the NYMEX Building and came over to humbly introduce himself. When I met Jack Sandner for the first time, he playfully pretended to punch me, apparently not appreciating my writing as much as others did. 

Amidst all this attention, I learned the meaning of the word ‘hubris’ and sought to avoid it at all costs. To keep myself grounded, I began teaching Sunday school. It was excellent practice in public speaking, interviewing, and thinking on my feet, as I taught middle schoolers with a friend from church and Scouting. We used an unconventional teaching style: we would just talk to the kids, listen to their stories, and then try to weave the week’s lesson into the conversation. Most of the time, they didn’t even realize what we were doing until they finally asked when we were going to start teaching them Sunday School stuff. Their eyes lit up when we confessed to our strategy.

I also volunteered as a Den Leader for Cub Scouts, marking the beginning of my long career in the Scouting movement, which continues to this day, although no longer at the unit level. After missing out on some career opportunities mentioned later in this article that would have taken me away from Chicago, I decided to focus my talents on being the best dad and Scout leader I could be, knowing these years were precious and irreplaceable.

At the newsletter, I was a one-man operation. I chose not to take advertising because I served as both the editor and the sales director, among other roles, and there was no one to hold me accountable for business tactics that plagued many industry publications. I wanted to avoid the pay-to-play model entirely and eliminate even the slightest chance of being perceived that way.

I wanted to maintain an independent voice because the industry needed it. This independence was rooted in my training as a trader, where thinking for myself was essential. It was also influenced by my background as a journalist. I graduated from Purdue with a Bachelor of Science in General Management/Finance and a Bachelor of Arts in Mass Communications/Journalism.

Although firms were interested in advertising in JLN, I kept declining. I finally accepted advertising for the first time when Jim Kharouf and John J. Lothian & Company, Inc. partnered to launch the Environmental Markets Newsletter (EMN). Since Jim had a full-time job as a journalist and needed help with content aggregation, we hired our first assistant editor and offered advertising in EMN.

In 2007, when John Matte approached me for a job, it marked the beginning of MarketsWiki and the transformation of John J. Lothian & Company, Inc. into a full-fledged financial news media company. At the same time, mainstream media was collapsing, and a new model for media firms was needed. The Wall Street Journal was sold to Rupert Murdoch, and both the Chicago Sun-Times and the Tribune were in bankruptcy, signaling it was time to try something new. FOW had let all its freelancers go, which allowed Jim Kharouf to join the company as editor-in-chief. Current Editor-in-Chief Sarah Rudolph and Chief Information Officer Jeff Bergstrom would join the firm in November 2007.

Jon Matte assembled the wiki software, using tools from the open source movement, and we were off to the races with a boatload of sponsors. Trading Technologies was the last to sign on before the launch. MarketsWiki was unveiled on January 11, 2008, at the STAC Winter Meeting, just before I moderated the exchange leader panel.

I was able to hire journalists from Dow Jones, Standard & Poor’s, FOW, and the Financial Times, as well as education and marketing professionals from CME Group and the Chicago Board of Trade to work on MarketsWiki. The MarketsWiki Development Team became an ongoing open door for journalists and market professionals who needed a place to work and share their skills while searching for their next job. We attracted original talents like Jessica (Titlebaum) Darmoni, who was looking for a mentor and found one in me.

After the Financial Crisis of 2007-08, Harris Brumfield asked me to go to Washington, D.C., and represent the interests of the futures markets as best I could. With some assistance in the form of introductions from TT-hired lobbyists, I attempted to join the Financial Crisis Inquiry Commission. Unfortunately, it was staffed by career politicians and proved to be a wasted opportunity. I then floated my name for the position of CFTC chairman but lost out to a man named Gary Gensler. That effort was to put my name on the radar in Washington. The FIA job that John Damgard had once suggested I might be a good candidate for ultimately went to Walt Lukken. Eventually, I was appointed to the CFTC’s Financial Technology Advisory Committee, where I served for several years, striving to represent the interests of everyday market participants.

The end of the first ten years served as a launch pad for John Lothian News and the work that would follow over the next 15 years. The genesis came when NYSE Liffe asked for a proposal for a metals newsletter, having acquired the former CBOT metals complex from CME Group. NYSE Liffe US agreed to sponsor JLN Metals exclusively, which provided us with the resources to hire my nephew, Ryan Lothian, who had been let go by the IP auction investment banking firm Ocean Tomo. We were also able to bring on Chris McMahon, a former Futures Magazine editor with a strong background in metals.

Ryan brought the insights from his new media master’s degree program at DePaul University, where he had developed a marketing plan for Ocean Tomo. We implemented this plan for JLN Metals, then expanded it to create other newsletters and blogs, eventually transitioning JLN to the new platform. Ryan also initiated MarketsWiki.tv as a rogue project, which, in retrospect, might have been his way of facilitating his brother Patrick’s involvement in the company. Ryan went on to build JohnLothianNews.com and contributed to numerous other projects, including Special Reports, Exploring Financial Technology, and MarketsWiki Education.

People often asked me if I ever imagined the newsletter would grow this big. My honest answer is that I never had the time to stop and think about it. There was always another problem to solve, whether it was a financial crisis, an FCM failure, trading floors closing, or exchanges going public or merging. When you’re drinking from a firehose, all you can focus on is the water.

I am deeply grateful to all the people who have helped me build the John Lothian Newsletter into a twenty-five-year institution, starting with Tom Price. Tom wisely recognized that my sometimes contentious independent views were not suited to be official Price Group communications. This encouraged me to blaze my own trail, ultimately leading to the creation of John J. Lothian & Company, Inc. Tom’s thriftiness also pushed me to think outside the box to compete in the electronic brokerage space.

The late Peter Wind was an early adopter of JLN, having been referred by his former Cargill partner Bernie Dan, who was then at the Chicago Board of Trade. Peter used JLN as a calling card during his sales calls, encouraging industry participants to sign up for the newsletter. Then-CME CIO Scott Johnston recommended at an all-employee meeting that they subscribe to the newsletter. The late George Gero would forward the newsletter to his friends in the Commodity Floor Brokers and Traders Association every day. I could go on, but there are too many stories to tell and people to thank, both inside and outside the company.

The newsletter was viral and a must-read because the world was changing rapidly, making it crucial to stay informed if you wanted to still have a seat when the music stopped on open outcry trading or whatever risk came next. And the risks kept coming. The markets continued to evolve. The non-price risk news that we began covering has only multiplied as the number of products, exchanges, trading platforms, and people involved in the markets has increased exponentially.

I remain convinced that the need for the John Lothian Newsletter is as strong today as it has been at any time over the past 25 years. The potential audience is larger because the markets are more globally dispersed and dynamic. And there are simply more products than ever before.

While the audience of fish-sandwich-eating pit traders has largely disappeared from the CBOT Building over the last 25 years, and John Lothian News has transitioned into a virtual firm rather than maintaining a daily presence in the iconic 1929 44-story Art Deco building, JLN remains a vital part of the Chicago market landscape and beyond.

If the next 25 years are as exciting as the last, they will be amazing!

Prior to his being named to the FIA Hall of Fame in February of 2024, John Lothian was interviewed by John Lothian News intern Joanna Clohessy about his career and being inducted into the hall of fame. He knew before the announcement it was coming and had Clohessy interview him during her one week internship with this firm. The internship was part of a school program for Timothy Christian in Elmhurst, IL. Clohessy is headed to Indiana University in the fall of 2024 to study journalism and she had the chance to write a story about Lothian and conduct and edit this podcast. Here is the interview with John Lothian, the executive chairman and CEO of John J. Lothian & Company, Inc. and publisher of John Lothian News about his career and what it means to him to be named to the FIA Hall of Fame. 

In the late 1960s, there were two rogue candidates who ran for the role of chairman of Chicago's leading futures exchanges. One was Leo Melamed, head of the "Young Turks" at the Chicago Mercantile Exchange and the other was William Mallers, Sr. the youngest man ever elected chairman of the Chicago Board of Trade.

This infusion of young blood into these stodgy organizations would transform Chicago's financial markets and change the course of its place in the global financial markets. Melamed would lead the creation of the International Monetary Market, a separate exchange that would later be rolled back into the CME. Melamed's accomplishments during his career are legendary. 

Mallers would lead the committee at the CBOT that led to the creation of the Chicago Board Options Exchange. Both Mallers and Melamed would play a part in the creation of the National Futures Association, with Mallers finding CBOT President Robert Wilmouth a new job as NFA president. 

Melamed's story is well known via the multiple books he has written about his experiences and his long tenure on the board of the CME, which only ended a few years ago.

Mallers would step aside after one term as CBOT chairman and slate the man he had run against as a rogue candidate as chairman to replace him. Mallers would wield power behind the scenes at the CBOT for the next fifteen years without any official title. OK, maybe he was the unofficial godfather of CBOT politics at the time. 

Melamed would serve multiple terms as chairman of the CME before finally stepping aside for his protege Jack Sandner, though Melamed still wielded power from the CME executive committee he chaired for many years.  

Joe Sullivan talks about Mallers in his paper about his career and the beginning of the CBOE, noting it was Mallers who resurfaced after leaving the limelight of the chairman's position to weigh in on the question of which members of the CBOT should be able to trade on the CBOE. Mallers said that "the purpose of the undertaking had been to provide trading opportunities for all members whether or not they chose to use them at any given time." Sullivan noted that giving CBOT members this perpetual right would bite CBOE in the butt later. 

The story I was told by Mallers, whom I worked for in the 1980s at First American Discount, was that Eddie O'Connor had proposed creating an exchange to trade stock options at a dinner and outlined the plans on a cocktail napkin. Mallers took that idea as chairman and drove it to reality, along with O'Connor, Paul Maguire and several other key players at the CBOT.

The first board of directors of the CBOE did not have Mallers on it, but it did have Pat Hennessy, from Hennessy & Associates, the firm that Mallers was the president of when he was chairman. You can see how Mallers worked, having key allies in positions of power at the CBOT and also at the CBOT Clearing Corporation.

I met Mallers after he had fallen out of favor at the CBOT, and Tom Donovan as a strong CBOT president had changed the power dynamics of the exchange. 

As we celebrate the 50th anniversary of the CBOE, now Cboe Global Markets, I wanted to remember William Mallers, Sr., a man largely forgotten to history. Mallers died in 2006 at the age of 77. He had been gone from the industry since 2000 when First American was sold to ED&F Man, Inc.

Mallers is someone who I think belongs in the FIA Futures Hall of Fame. His political leadership at the CBOT allowed the CBOE to become a reality, helping members find new trading opportunities. Those trading opportunities created a whole new industry. 

In baseball, some veterans get into the Hall of Fame via the Veterans Committee. The people who were in the room where it happened, where the plan for the CBOE was outlined on the cocktail napkin, are all gone. Those who saw Maller's leadership first hand in helping start the CBOE are all departed, including his good friend and business partner in FADC Leslie Rosenthal. There are just a few of us left who know his story and his contributions to the CBOT member opportunities and to all our futures. 

Mallers was not without his faults. I am not without mine. But Mallers' contributions for me are pure Hall of Fame material and I wonder if we would be celebrating today's anniversary if not for his leadership.  

The Small Exchange announced plans to launch its first options contract on Small Precious Metals Product (SPRE) index futures on January 25, 2022. I interviewed Small Exchange CEO Donnie Roberts about the new product, Small Exchange’s plans for future options contracts, and the impending deal for the exchange to be acquired by Crypto.com. 

The SPRE index is made up of gold, silver and platinum prices, with the largest weighting on gold, then silver, Roberts said. The new options contracts will be cleared at the OCC, same as The Small Exchange’s futures contracts.

Roberts said they have two market makers in place for the new options contracts, and the exchange and OCC have done six months of testing to prepare for the launch.

Here is my interview with Donnie Roberts of the Small Exchange.

I wrote this column in 2012 for the John Lothian Newsletter after the death of my friend and Assistant Scoutmaster Bill Griswold. Reflecting on his life of giving, I reflected on all the giving of the readership of the John Lothian Newsletter over the years. 

Here is the commentary from 2012.

~John Lothian

When my son Tim was ten, he came home from school one day and told us at the dinner table about his day touring the middle school with his grade school class. After he finished explaining about Bryan Middle School in Elmhurst, which he would be attending next year, I told him it was a waste of his time.

I told him his mother and I had decided to send him to Hogwarts, the school Harry Potter attended. He smiled and said, “Right, Dad.”

This is the story of how some other parents and i pranked out sons into thinking they were going to Hogwarts.