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The Asylum: The Renegades Who Hijacked the World's Oil Market: The most important globally-traded physical commodity is crude oil, and crude oil prices are, of course, set by traders at a venue that was originally founded as the "Butter and Cheese Exchange of New York." This book is the story of how it happened: how that obscure exchange became the NYMEX, and how it became the main benchmark for oil. It's easy to be taken by surprise at things like the SPAC boom or IPO pump-and-dumps (note: this is still happening!). But the finance industry used to be much, much scruffier than it is today, particularly around the periphery. The story starts at a time when NYMEX didn't even trade crude futures, and its big business was potato futures. This was an incredibly corrupt business: they traded Maine potato futures, and traders were not above bribing Maine's farmers to withhold shipments or bribing inspectors to let rotting food through. There were other scams: a trader who executed a trade for a client might trade ahead of the client, or go back through their records at the end of the day and retroactively assign profitable trades to favored clients. (Connoisseurs of 90s political scandals may recall that this was the best explanation proferred for that time Hillary Clinton made ~97x her money in less than a year as a first-time cattle futures trader.) The exchange was never especially beloved, but got into bigger-than-usual trouble in 1976, when potato titan J.R. Simplot defaulted on a massive short position. The exchange was censured, and given a short period to clean up its act or shut down. Since the potato market had collapsed, they needed new products to trade, but regulators would only allow them to reintroduce products, not to add new ones.

Luckily for NYMEX, long ago they'd traded fuel oil futures, and the 70s were an exciting time to bet on energy. They reintroduced those futures, they took off quickly, and the rest is history. It's still an interesting and sometimes dubious history, of course; there are many anecdotes about events that, in today's terms, were not 100% compliant with the typical financial services company's ethics policy, HR policy, drug-use-during-work policy, alcohol-use-before-even-getting-to-work policy, etc. And there's plenty of politics. (In stories with multiple sides, the author tends to be more sympathetic to whoever talked to her the most, but this is inevitable in business books.)

One surprise in the book was how long it took for the oil industry to get used to the idea of actively trading oil. They were willing to do so over-the-counter, but the big oil companies were extremely reluctant to let anyone know that they were hedging or speculating on the NYMEX. For a long time, they operated through front companies, both to obscure the size of their trades and to avoid embarrassment, but eventually they decided to be open about it.

Overall, the book is a good reminder of two things. First, many of the professional, respectable organizations of today were much more freewheeling in the very recent past. For the veterans who were around during the wild days, it can be a bit sad to let go of some of those traditions, though all the money they made along the way certainly helps. The other lesson is that it's incredibly valuable to be the central node in a network. There was huge demand to bet on the price of oil, and NYMEX got there first.

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