David Segel

The Early Days

Mako People
August 10, 2020
Mako has developed as an evolution of commercial success and cultural formation over a span of 30+ years.

I argue that Mako was born around the mid 1980’s, just before Eddie Murphy and Dan Aykroyd made the derivatives industry famous with their movie “Trading Places” and just after the global stock market crash of 1987 -  when the world was abruptly reminded that “what goes up slow, comes down fast”. At that time, I was a junior pit trader for a New York market making firm called Singer Wenger Trading Company.

I traded sugar options on the floor of the Coffee, Sugar, Cocoa Exchange. It was before computers could run pricing or risk models. It was before the concept of “skew” had been articulated. It was before the advent of automated execution or straight-through-processing. In fact, it was before the widespread acceptance of contracts called “puts”; many products only listed “calls” back then

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In busy markets it was mayhem. But, the fledgling business of Mako grew out of that marketplace greenhouse.

Options pricing was based on simple tables that we often wrote up by hand the night before a trading session. We based our pricing on some loose understanding of a Black-Scholes model, combined with a heavy dose of intuition that often took priority over the math. Matching trades was a challenge, as everything was agreed with hand signals. A seller would scribble down on an index card the trade he or she thought was executed, would then place the card between the middle and forefinger and aggressively fling it in a spinning arc towards the centre of the trading pit, where an exchange official would sit, surrounded by fishing net (to catch the cards) and wearing chemistry goggles (so the flying cards did not catch an eyeball). The official would attempt to record the alleged transactions, and out-trades sometimes took weeks to resolve. In busy markets it was mayhem. But, the fledgling business of Mako grew out of that marketplace greenhouse.

By the early 1990s we had formed a consortium of floor traders and called ourselves Saratoga. Saratoga gathered people who were convinced there should be better ways to trade the markets: use automation; work as a team; study the math; find new opportunities to add value to the markets. Markets have changed dramatically over the last 30 years, and most of the success stories of that time have been forgotten now, left behind in the category of “last generation’s trading firms”. But, Saratoga evolved to become Mako. Mako evolved to become one of today’s leaders in the field. And yet, we still gather people together to pursue the same ambition - to seek out better ways to trade the markets.

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