Arnold Staloff, 74, of Cherry Hill, a leader among the innovative financial traders who challenged the world’s central banks in the 1980s and helped ensure the survival of Philadelphia as a financial center, died Friday, Dec. 6, at Jefferson Cherry Hill Hospital after a heart attack, his longtime business partner James J. Bloom said.
“Arnie literally did not sleep for days” when he was committed to a big project, like the 1980 move by his then-employer, the Philadelphia Stock Exchange, to its longtime underground home at 1900 Market St., Bloom recalled in a eulogy at Mr. Staloff’s graveside service Sunday, Dec. 8, at Locustwood Memorial Park in Cherry Hill.
Mr. Staloff invented the currency-trading option in 1982, challenging bank control of world exchange rates, Gregory Millman wrote in The Vandals’ Crown: How Rebel Currency Traders Overthrew the World’s Central Banks. Mr. Staloff worked for the local exchange from 1971 to 1989.
Reagan-era deregulation and the computerization of stock-trading, options contracts enabled traders and their clients to bet on the future of currency exchange rates without buying piles of foreign cash. They were among the earliest of a wave of “derivative” securities that enable investors to invest in economic benchmarks, such as stock indexes or interest rates, without asking permission from the central banks that set rates or corporations whose value derivatives estimated.
Derivatives have been credited with vastly increasing profit opportunities for traders even as stock-trading margins collapsed. They have been blamed by industry critics for making financial risk harder for banks, investors and corporations to measure, leading to losses by the unwary.
Despite the local exchange’s role as an innovator, ferocious competition forced Mr. Staloff and the exchange to keep developing new products to avoid the fate of dozens of regional markets that shut as trading automated.
At least one of the businesses attracted to the exchange on Mr. Staloff’s watch has grown into a worldwide trading force, with 2,000 employees and a presence in world markets: Susquehanna Group International, based in Bala Cynwyd and headed by former Philadelphia trader Jeff Yass.
The Philadelphia Stock Exchange was bought by the Nasdaq stock exchange group in 2007 and has since formed the base of Nasdaq’s options trading and technology group, still based in Philadelphia, in the FMC tower.
According to Bloom, Mr. Staloff was also the intellectual founder of what are now called exchange-traded funds (ETFs), investment portfolios that are registered and trade like stocks, which have in recent years crowded aside mutual funds as many Americans’ favorite investment vehicle.
“Arnie conceived the idea,” which he called “cash index participations — CIPs,” Bloom said. The exchange proposed selling them in 1989, according to news reports. Staloff “worked out all the complex trading, business and political issues.” But shortly before the first such stocks were to trade on the Philadelphia exchange, regulators halted Mr. Staloff’s plan. The first ETFs, designed by others, started trading in 1993.
In 1989 Mr. Staloff left the Philadelphia market to run the New York Commodities Exchange. Mr. Staloff led a cost-cutting drive, pushed for handheld trading devices, sought to extend strong Philadelphia-style management control over independent-minded traders, and discussed a merger with the rival New York Mercantile Exchange. But “things just didn’t mesh,” the New York Times reported when Mr. Staloff left in April 1990. Those two exchanges merged three years later.)
Returning to Philadelphia, Mr. Staloff joined Bloom to form Bloom Staloff Corp., which became a busy trader for partners including Salomon Bros., Smith Barney, Dean Witter, and other leading U.S. and European banks and brokers.
“Arnie made us a force in the industry. He built the complex relationships” — and also urged senior employees to buy equity in the firm so they had what traders call skin in the game, Bloom said. In 2003 Bloom Staloff was sold to Tradebot Systems Inc., where Mr. Staloff continued to work for a time.
By then, Mr. Staloff had suffered the first in a series of strokes that changed his personality, his daughter Lindsay Staloff Peterson said.
Added her sister Kymberly Staloff, “Before, he was a people person. He was compassionate, understanding, no matter what problem I came to him with. If anyone asked him to lend money, he said, ‘Here’s half, and you don’t have to pay me back.'”
But from the strokes, she said, “he lost that special quality. He became short-tempered. He was still brilliant, but he knew he had changed.” She credited her mother, Sharon, with sticking by Mr. Staloff and supporting him through his surgeries and recoveries. Her mother died last year.
Even after his strokes, “my father had an amazing memory,” Lindsay added. “He would pay attention. He would help people, or give them good advice, or refer them. He would shake the hand of a homeless person; he learned their names. For me at age 16, that was very profound."
Mr. Staloff grew up in Kenvil, N.J., graduated from Miami Beach High School, and received a bachelor’s in marketing and finance from the University of Miami in 1967. He worked for the Securities and Exchange Commission before joining the Philadelphia exchange.
He was a director of the former Lehman Bros. derivatives unit and a member of the Philadelphia International Airport Advisory Board Executive Committee, and served on other company boards in the United States and China. He was active with the Allied Jewish Appeal, the Variety Club, and other charities. He played the saxophone and counted the jazz trumpeter Dizzy Gillespie among his friends.