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by Richard L. Sandor
Good Derivatives: A Story of Financial and Environmental Innovation
Cover Page
Title Page
Copyright
Dedication
Contents
Foreword
Preface
Acknowledgments
Chapter 1: The Early Years
The House of Sandor and Mirner
Bobby Fischer and My Days at School
Discovering Economics in Brooklyn
On to Minnesota
Berkeley Beckons
Chapter 2: Trying to Change the World
A Different Structure for a Different Kind of Exchange
Chicago—My Kind of Town
Structuring the Exchange
Talking to Regulators
The Dream Is Dashed
Chapter 3: The Berkeley Years
A New Direction
Plywood Futures—Learning How Others Create a Good Derivative
Grain Markets and Mortgages
Mortgage Interest Rate Futures—Creating Good Derivatives
Chicago Calls
Chapter 4: The Chicago Board of Trade Years
Mentors and Leaders
Trading with the Soviets
An Explosion in Grain Prices
Iron Men in Wooden Pits
The Gulf Wheat Futures Contract
Contract Improvement—The Brooklyn Farmer in Iowa
The Relationship between Futures Prices and Spot Prices
The Gold Futures Contract
Chapter 5: The Chicago Board of Trade Years
How GNMAs Work
Drafting GNMA Futures
Selling the Concept to Financial Institutions
Enabling Legislation and Regulation for GNMA Futures
Transparent Markets—Greetings from the Grim Reaper
The GNMA Contract: Simple in Concept, Complex in Detail
The First Financial Good Derivative—GNMA Mortgage Interest Rate Futures
Contracts without Lawyers
Her Name was Ginnie Mae
The Economic Benefits of GNMA Futures
Moving On
Chapter 6: Educating Users and Building the Market
Adapting at Conti
Travels with Charlie O. Finley
Finding Early Adopters
The Relationship between Prices in Different Months
Disseminating Prices
The Gordian Knot of Building a New Market
Chapter 7: Treasury Bond and Note Futures
Trading a Notional Bond
Marketing Treasury Bond Futures
Educating Users
New Interest Rate Contracts
Ten-Year Treasury Note Futures
Innovation by Competition
Commoditizing Stocks
Chapter 8: The Decade of the Eighties
Exchange-Making in London
Three Men and a Market—MATIF
The Tale of Two Cities
On to Drexel
Once a Teacher, Always a Teacher
Drexel Grows
Drexel Becomes More International
Eurodollar and Stock Index Futures Contracts
The CBOT Options on Bond Futures
Chapter 9: Globalizing Chicago Exchanges
The Secret Ingredient of the CME
Financing Entrepreneurs
Catering to a Global Market with Night Trading
The Attack on Equity Derivatives—Wet Sidewalks Cause Rain
The Demise of Drexel
Chapter 10: Environmental Finance
The Acid Rain Problem in the United States
The Clean Air Act Amendment of 1990
Starting Over
Jack Welch and Kidder, Peabody
The CBOT's Role in the EPA Acid Rain Program
The First EPA Annual SO 2 Auction
Chapter 11: Blame It on Rio
In Search of Trees—Commoditizing CO2
Caipirinhas and Climate Change
A New Academic Field
Chapter 12: The Beginning of the Entrepreneurial Years
Commoditizing Catastrophes
Selling Catastrophe Futures
Entering the Insurance Space as an Entrepreneur
SO 2 Emissions Trading at Centre Financial Products
Creating New Insurance Products
Crop Insurance
Charlie O. Finley's Death
Exiting the Insurance Space
Postmortem
Chapter 13: You're Gonna Trade What?
The G-77 Meeting at Glen Cove
The Global Warming Emissions Trading Program (GETS)
Preserving Rainforests through Markets
The Policy Forum on Greenhouse Gas Emissions Trading
The White House Conference on Climate Change
The Kyoto Protocol
The Demise of GETS
Chapter 14: From the Pit to the Box
A Civilization Gone with the Wind
Stock Index Futures—A Postscript
The Battle of CME and CBOT
Battery Ventures
Unlocking Liffe
The Wagner Patent—Good Ideas Never Die
Chapter 15: Conceiving a New Kind of Exchange
The Largest Voluntary CO2 Offset Trade in History
The Dow Jones Sustainability Index6
Sustainable Forestry and Climate Change—A Case Study of Failure
A Chance Encounter—The Beginning of the Chicago Climate Exchange
Chapter 16: The Twenty-First-Century Lighthouse
Spreading the Light
Ramping Up
Preliminary Market Architecture
Educational Outreach
Refining the Preliminary Market Architecture
Recruiting Members to Design the CCX
Finalizing the Preliminary Market Architecture
Chapter 17: CCX Market Architecture
“If You're Not at the Table, You're on the Menu”
The First Meeting for the Utility Technical Committee
The First Meeting for the Industry Technical Committee
Consensus Building
The End of the Day
The Chicago Accord
Seeking Investors
Chapter 18: Chicago Climate Exchange
Recruiting the First Members—Voluntary Participation versus Legislative Mandate
Exchange Governance, Structure, and Regulation
The Electronic Trading Platform
The Registry, Clearing, and CCX Rulebook
The Auction
The Rocket Takes Off
Financing an Exchange
Chapter 19: The Rise of the Chicago Climate Exchange
Recruiting the A-Team
The CCX University
Educating, Marketing, and Sales
Building Demand
Building Liquidity
Building Supply
Corporate Restructuring
Extending the CCX Program
Market Highlights
Chapter 20: The Fall of the Chicago Climate Exchange
Engaging the U.S. Congress
Waxman-Markey—The Beginning of the End
Falling into a Coma
A Post-Mortem
Looking West
The CCX Legacy
Chapter 21: The Chicago Climate Futures Exchange
Setting Up Shop
Launching Sulfur Futures
Designing the Contract
The Rise
Sell, Sell, and More Sell
The RGGI Battle
Benefits of CCFE
The Fall
Closing Thoughts
Chapter 22: The European Climate Exchange
Tapping into the European Psyche
ICE and CCX Collaborate
Establishing ECX
ECX Moves On
The Economic Value of an Exchange
Reflections on the Success of ECX
Letting Go
Chapter 23: India
Brahmins and Katyas
Building Interest for Offsets
ICX Is Conceived
The Andhyodaya—A Chain Reaction of Innovation
Holy Cows and Sacred Forests
The Tata Motors Auction
Moving On
Chapter 24: Opening New Markets in China
First Encounter with China
Satellite Broadcasts
An Opportunity Arises
Returning to China
In Search of the Perfect Exchange Partner
A Turn of Fortune
The Birth of the Tianjin Climate Exchange
Raising TCX
The Opening of TCX
The World Is Getting Flatter!
The People's Bank of China
A Postscript on China
Chapter 25: Good Derivatives
The Past 40 Years
Laying Out the Construct for a Good Derivative
The Next Forty Years
Chicago, My Kind of Town
Appendixes
Appendix A: Commodity Exchange Operating System, 1969
Appendix B: GNMA Advisory Committee
Appendix C: CBOT Financial Instruments Committee, 1975
Appendix D: CBOT Financial Instruments Committee, 1977
Appendix E: CBOT Financial Instruments Committee, 1982
Appendix F: CCX Committees
Appendix G: CCX Subcommittees
Appendix H: CCX Members
Acronyms
Exchanges
Environmental
Others
Glossary
Index
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