What drew you to the derivatives industry?
Actually, I was drawn into the industry when I was an associate at Baer Marks & Upham, where I worked for Steve Selig and Marc Buckstein. In 1977, the CFTC mandated a rule review at COMEX, which the firm then represented. The firm tasked me and another associate, Alan Brody, who would go on to become president of COMEX, with reviewing every piece of paper generated by COMEX since its inception in the 1930s to identify any processes, restrictions or requirements that should have been submitted to the CFTC as part of COMEX’s original rule submission to the new agency. In 1979, I joined the legal department of what was then Morgan Guaranty Trust Company and was included in the working group that assessed whether the bank should form its own captive clearing firm in order to better manage its credit risk associated with exchange-traded transactions. Following its formation in 1982, I became the General Counsel of Morgan Futures Corporation, subsequently renamed JPMorgan Futures before being merged into JPMorgan Securities. In December 1992, Gene Ludwig, Bill Clinton’s Comptroller of the Currency designee, asked me to join him at the Office of the Comptroller of the Currency to help establish policy with respect to national banks’ derivatives activities. After issuing the first U.S. bank derivatives regulatory guidance in late October 1993 (Banking Circular 277 – “Risk Management of Financial Derivatives”), I was appointed Senior Deputy Comptroller for Capital Markets. I left the OCC in 1996, and following a short stint as a partner at Arthur Andersen, I became the General Counsel and Chief Operating Officer of BrokerTec Futures Exchange and BrokerTec Clearing Corp. When the exchange was subsequently acquired by Eurex, in 2004, I re-joined Gene as one of the first Managing Directors at the then one-year-old Promontory Financial Group, where I have headed the firm’s derivatives practice since then.
Who have been your role models and the most influential people in your career?
Gene Ludwig has not only been a role model, but the most influential person in my career. Influential because he tapped me for the position at the OCC, where I became a key staff member on the President’s Working Group on Financial Markets (whose members were Bob Rubin, Alan Greenspan, Arthur Levitt and Mary Schapiro). That position gave me not only exposure to some of the most important people in the financial service industry, but insight into, and an appreciation for, the complexity of financial regulatory policy-making. It was, undoubtedly, the best experience of my professional career.
Gene has been a role model because of the importance he has always placed on diversity, equal opportunity, and treating people fairly and the focus he brought to bank regulation on the importance of fair lending and equal access to credit.
How have things changed in terms of diversity and inclusion since you started working?
There are many more Black legal and compliance professionals in the derivatives industry now than when I first got involved. I don’t remember any other Black people at the first FIA Law & Compliance Division Workshops that I attended in Annapolis in the early/mid-80s; and Steve Spence (Merrill Lynch) was the only Black person I knew of on the business side of an FCM at that time. However, though our numbers have grown, they are still scant, considering the enormous growth of the exchange-traded and OTC derivatives markets since that time.
And the industry has some major blind spots when it comes to diversity and inclusion. At FIA Expo in 2019, there was a panel “Diversity in Derivatives” that didn’t even include a Black person. At FIA Expo the year before, the CEO of one of the largest derivatives exchanges, in response to a question about diversity at his exchange, stated that he didn’t see color. Though his comment was intended to convey the absence of bias, it actually conveyed an insensitivity to the enormous challenges faced by people of color in the derivatives industry.
I am heartened, however, by Commissioner Rostin Benham’s efforts at the CFTC and what is happening at NFA, where I serve as a public director and member of the Executive Committee. NFA has recently enhanced its robust and comprehensive diversity and inclusion program; and that program has strong support from both Tom Sexton and other members of executive management, as well as the board.
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What do you see as the biggest barriers to Black and ethnic minority professionals growing into leadership roles?
Though unconscious bias presents the biggest impediment to the advancement of Black and ethnic minority professionals in the derivatives industry, it is a mistake to minimize the ongoing impact of very conscious bias; and let’s call that by its name – racism. This racism, which at times goes unrecognized by our white colleagues in the industry, is demoralizing and can have a very direct impact on our ability to succeed and thrive in the industry. I offer an experience I had a few years ago as an example: Members of my team and I had a meeting with the chief risk officer and chief compliance officer of a multinational bank to whom we were proposing a swap dealer compliance risk assessment review. When we arrived at their offices, it was clear from the looks on their faces that they weren’t expecting to see a Black person leading the team. Throughout the meeting, they looked only at my junior white colleagues and directed all of their questions to them. It would be giving them an undeserved benefit of the doubt to believe that they weren’t consciously aware of their behavior. Needless to say, they did not retain us for the review.
In fact, this incident highlights a significant barrier that Black and other ethnic minorities face – not only must we deal with unconscious and conscious bias at our employers, but also at our clients, business partners and service providers.
Tell us one thing you hope for future generations.
That the financial services industry and its regulators understand that bias (whether conscious or unconscious) artificially limits the pool of qualified talent for positions in the industry; that they accept the conclusions of numerous academic studies that more diverse organizations perform better in terms of decision-making and delivering value to their stakeholders by any number of accepted metrics; and that they realize that it is to their benefit to have staff, senior management and, importantly, boards that are diverse across all dimensions, including, but not limited to, gender, race, color, sexual orientation, disability military status and age.
Douglas E. Harris is a Managing Director at Promontory Financial Group, an IBM Company. He also serves as a public director and member of the Executive Committee at NFA. Harris previously was the Chief Operating Officer and General Counsel at BrokerTec Futures Exchange and BrokerTec Clearing Co, and served at the Office of the Comptroller of the Currency.
