daughter protested the decision because it clearly hurt more women than men. In November 1996, women at Brown University won a ruling in federal court, citing that the University discriminated against women when it demoted its women’s gymnastics and volleyball teams from university-funded to donor-funded varsity status -- and then argued that it was in compliance with Title IX. The court said that Brown violated Title IX and rejected Brown’s challenge to Title IX based on the stereotype that men were more interested in sports participation. The Supreme Court declined Brown’s petition to hear the case, and the women’s teams were restored to university-funded status. Hull recalled what his daughter saw when she returned to campus after the Supreme Court decision. The campus newspaper ran a headline saying, “Megan Hull: How Can You Sleep At Night?” In 1994, Megan Hull testified in front of a Congressional committee studying the impacts of Title IX. She left to play volleyball at Georgetown and then returned to Brown in her senior year, playing on the team reinstated by the courts. Ten years later, Hull’s youngest daughter Courtney went to Brown and played on the volleyball team. They won the Ivy League Championship during her freshman year. “That opportunity would not have existed except for her older sister,” he said. At 73, Hull is not slowing down. Walking through his trading offices next to the Federal Reserve Bank of Chicago across the street -- and downstairs from the Chicago Board of Trade -- he is excited about this new evolution of online trading. In one half of the modest office floor, programmers are creating code that the traders across the room will implement for future trades. This is the new model of trading. No more yelling across a pit to buy pork bellies. Instead, computer programs will crunch huge amounts of data, use algorithms to determine the best spreads for futures and options, and then, in seconds, will execute buying and selling. Hull is quick to point out that this is not the high-speed trading that was exposed in the recent book, “Flash Boys.” That trading relies on seconds, milliseconds and even nanoseconds to execute trades that make money based on huge volume -and done very quickly to exploit momentary price differentials that may be very small. Hull said his trading is for the long haul because “flash” trading is an “end game.” At some point you can’t move data any faster than the speed of light, so that ends any advantage anybody might have. Instead, Hull’s trading is about using computer knowledge and disciplined execution. As he told Fast Company magazine, “All you need is a mathematical advantage and the controls to ensure you stay in the game. Everything else takes care of itself.” It goes back to his days at the card tables. “You get an advantage and then you stay in the game.” Just like in cards, trading on Wall Street is about discipline not emotion. To this day, Hull leans on the academic world for inspiration and techniques. He cites a long line of researchers of human behavior and market psychology in explaining how he built his systems. He recently published an academic article along 30
Coastlines | Winter 2016
It Was All In The Cards In the Big Player, a breakthrough 1977 book about card counters who beat the biggest casinos in the world, one of the important players was an insurance salesman named Steve Lottier. Lottier was described as a sharp looking, well-dressed math whiz who helped develop the mathematical odds for when a bet had a better than even chance of beating the house. According to the book, Lottier perfected the math formulas on his computer at work. In a recent interview in his Chicago trading offices, financial whiz Blair Hull admitted that he was Steve Lottier and the “Big Player” was about a team he played with from 1971 to 1975. Over that period of time, Hull recalled he spent 50 days a year at the blackjack tables of Nevada playing 800 hands a day. In all, he would play 40,000 hands a year or 200,000 hands over that four year period. Using theories first developed by an academic Ed Thorp, Hull and his team combined card counting with complex mathematical formulas to predict the best odds, and then would bring to their table “the big player” who made the winning bets. The team by their own estimates won more than $1 million until the Sands casino uncovered their whole system and banned them. That signaled the end of “the team.” The Big Player was written by Ken Uston, the man who started the team. Midway through their playing days he describes “Steve’s” ambition in the mid-1970s: “Entering the stock option field by using computer programs to detect exploitable market anomalies, as well as the notion of a computerized racehorse handicapping system.” The racehorse idea went nowhere. As for the “market anomalies,” that was where Hull really beat the house.
with Xiao Qiao titled “A Practitioner’s Defense of Return Probability” and launched an active ETF on the New York Stock Exchange under the symbol HTUS. Once a math major, always a math major.