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Every day, trillions of dollars worth of interest rate derivatives are traded back and forth. And yet despite its stunning size today, 50 years ago the interest rate derivative complex did not exist at all. Today Jack interviews Dr. Richard Sandor, chairman and CEO of the American Financial Exchange (AFX), who is known as the “father of financial futures” because he created the world’s first interest rate and bond futures in the 1970s. Sandor explains how the relentless inflation of the 1970s caused wild swings in interest rates that jeopardized financial stability, and how the financial futures he created helped tame (or at the very least, transfer) these risks.

Sandor argues that the London Interbank Offering Rate (LIBOR) to which many interest rate futures (often called “eurodollar futures”) are still pegged has been “discredited” by the schemes of banks to manipulate it (see link below on LIBOR scandal). Sandor shares his vision for the forthcoming LIBOR replacement in June 2023, and tells Jack about his company’s benchmark, AMERIBOR.

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Article on LIBOR scandal: https://www.investopedia.com/terms/l/libor-scandal.asp

More info on Dr. Richard Sandor: https://en.wikipedia.org/wiki/Richard_L._Sandor

Follow Dr. Richard Sandor on Twitter: https://twitter.com/drrichardsandor

Follow Jack Farley on Twitter: https://twitter.com/JackFarley96

Follow Blockworks on Twitter: https://twitter.com/Blockworks_

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(00:00) Introduction

(00:40) Creating The World's First Interest Rate Future

(18:16) Creating A Two-Sided Market

(24:10) Paul Volcker's Role In Creating Interest Rate Volatility

(27:00) Eurodollars: "LIBOR Is Dead, The Emperor Has No Clothes"

(35:21) Replacements for LIBOR (London Interbank Offered Rate)

(47:44) Carbon Futures

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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.