Guttman Scrambled to Keep Exchanges Open : Bombing: After the World Trade Center blast, the controversial Nymex chairman played a major role to keep commodity exchanges from missing a beat.
Mayor David Dinkins had just finished getting his first look at the bomb-crippled World Trade Center when Z. Lou Guttman buttonholed him in the middle of a blocked street.
As chairman of the New York Mercantile Exchange, virtually the center of the world for oil prices, Guttman wanted Dinkins’ help reopening the city’s commodities exchanges.
Every other business in the buildings closed by the bomb blast would have to find temporary quarters and simply make do. But Guttman and other leaders in New York’s commodities trading community scrambled to get an exception.
With help from a mayoral aide, Guttman reached the deputy fire chief for safety, who determined what the exchanges needed to reopen.
On the following Monday morning, while other trade center tenants remained evicted and paralyzed, the Nymex and four other commodity exchanges were back in business. Guttman claimed a significant chunk of the credit.
Whether or not he was one of the heroes of the blast aftermath, it was another chapter of pushy advocacy for the 43-year-old Nymex chairman, whose reputation as a scrapper goes back to the days before he doffed the casual trader’s jacket for an executive suit and tie.
Zoltan Louis Guttman prefers to be called Lou, but is known on the trading floor by the ID badge “Gutt” pinned to his chest. He spent much of his adult life elbowing and clawing through the Nymex’s frenetic platinum and oil trading pits, gaining notoriety as an aggressive trader in an aggressive field.
Guttman became chairman of the Nymex five years ago, 10 years after he bought a seat on the exchange. A seat cost $14,000 then and is worth $260,000 now.
“You don’t survive if you don’t have a rugged individuality,” Guttman said.
But that rugged individuality might be contributing to doubts surrounding his future as chairman. In recent months, Guttman has been tainted by a trading scandal and federal regulator accusations of impropriety.
Traders say sentiment is growing that it’s time for a leader with a lower profile. Last month the Nymex board asked Guttman to quit. He refused. Tensions escalated.
A Nymex board nominating committee passed him over as a candidate for reelection. Guttman solicited signatures from 50 of the exchange’s more than 700 voting members to get on the ballot.
The nominating committee selected Daniel Rappaport, a floor trader and Nymex vice chairman with a low-key demeanor. The election is scheduled for March 16.
Rappaport filled in for Guttman during his five-month leave of absence late last year after an investigation by the federal Commodities Futures Trading Commission became public.
Last month the commission accused Guttman of violating commodity laws in trades on the New York Coffee, Sugar & Cocoa Exchange between March and October 1989. Guttman wasn’t accused of illegal trades himself, but of supervising an account that his then-partner allegedly used illegally.
The commission says the trades were designed to give the false appearance that the trading account had enough capital to buy large stakes in various commodities.
Guttman’s attorney says he’s confident his client will be vindicated, and that the commission’s decision to bring the charges so close to the election is unfair. Guttman would not talk about the charges, but said he has less money now than when he became chairman.
Although the timing of the trade center blast provided Guttman with a political opportunity to flex his results-oriented muscle, he said that wasn’t a motive in his feisty push to reopen the markets.
A prolonged shutdown, he said, would have threatened the Nymex’s preeminence as the leading oil market and undermined the ability of the entire industry to set fair prices.
There is some logic to Guttman’s argument. From the Middle East to West Texas, prices are determined largely based on the hedging and speculating in oil contracts done by screaming traders in the Nymex pit.
If the Nymex were out of business, oil buyers and sellers would have had to turn to alternatives.
“The oil industry would have understood one day, but after a week would have shifted to other markets,” Guttman said.
Oil companies and brokers say the situation wasn’t that dire. They would have sought short-term substitutes by using the International Petroleum Exchange in London or by buying and selling contracts among themselves.
But Guttman and others say the Friday afternoon explosion that crippled the trade center came at an awkward time because it coincided with a deadline to trade heating oil and gasoline contracts for March delivery. Traders holding unwanted contracts couldn’t sell them.
“We had to give people the opportunity to get out,” Guttman said. The Nymex solved the problem by combining Friday and the following Monday into one trading day.
Trading got started late Monday morning and operated with curtailed hours all week.