Howard Lutnick: Triumph in adversity
Cantor Fitzgerald lost 658 employees on 9/11. Thanks to foresighted disaster planning, customer loyalty and a determination to honour the dead, it has risen from the ashes, says Howard Lutnick
Before September 11, 2001, Cantor Fitzgerald was the largest wholesale financial service company in the world. With 2,200 employees worldwide and almost 1,000 in New York alone, Cantor Fitzgerald and its public subsidiary, eSpeed, were at the heart of the financial markets – the place where financial giants traded with each other. On September 11, we suffered incalculable losses when the attacks on the World Trade Center claimed the lives of 658 of our employees, most of the company’s management team and our headquarters. After that horrific day, the company, and our remaining 320 employees in New York, found ourselves at a crossroads. What reason could there be for us to go back to work?
Immediately after the attacks, Cantor committed itself to doing whatever it could to help the families of our lost colleagues. We pledged them 25% of the firm’s profits for five years and promised to provide health insurance through to 2011. We knew that the only way we could help our families was to keep focused, otherwise there would be no profits to share, no company to be part of.
Building on the legacy
Publicly, the tragedy defined Cantor Fitzgerald. Internally, while it has shaped who we are, we continue to grow and change from who we were that day. We have been driven by our commitment to our families, motivated by our need to succeed for them. Today, the results of that commitment are reflected in the success of three very distinct and exciting businesses. Cantor Fitzgerald has not only survived, but is now thriving as a leading financial services firm in the equities and fixed income markets. eSpeed, Cantor’s NASDAQ-listed, electronic trading subsidiary, continues to transform the way trading is done in the fixed income and foreign exchange markets. And BGC Partners, the remaining wholesale, voice-based, inter-bank brokerage business that we recently spun off, brought the success of Cantor’s past voice brokerage business full circle. The results have been beyond gratifying. The successful outcome of our decisions and actions in the days – and years – after September 11, 2001, offers insight into how we persevered through, and came back from, the worst of all circumstances.
The story of the minutes and hours immediately following the attacks has been told many times. The question then was one of mere survival – survival without the core of our business: the employees who were our company, most of our senior management team, phones, computers and our headquarters. The first step was to try to keep the business afloat. To do this, we had to transfer our wholesale inter-dealer fixed income business instantly to the eSpeed electronic trading platform, which could electronically handle the volume that was formerly managed by our voice broker employees.
These were emotionally devastating times, and without our experience and critical infrastructure planning, we could never have come through the way we did. Fortunately, and unfortunately, we had experience in handling disaster. The 1993 bombing of the World Trade Center had claimed far fewer lives, but it did close many businesses. We learned an important lesson at that time – that most disaster recovery plans were themselves a disaster.
Redundancy pays
After the 1993 attack, we scuttled the disaster plan we had then and developed a redundant contingency plan that called for triplicate backup systems. Fundamentally, we tried to create “concurrent computing”, instead of “hot backup”. We had learned how critical it was for a company to have multiple redundant systems and how important it is for diverse groups of employees to be able to operate our redundant sites.
Because of our experience and disaster planning, our redundant systems in London and New Jersey, the incredible, non-stop hard work of our surviving employees, and the goodwill of so many other companies, eSpeed was able to bring the enormous US Treasury market back online in 47 hours, days ahead of the New York Stock Exchange and the US equity markets.
eSpeed is still at the forefront of the electronic markets. Today, we handle more than $40 trillion a year in fixed income transactions alone. While we were forced to consolidate our product offerings in the aftermath of September 11 to focus on our core government bond markets, recently we have expanded our electronic trading model to automate and revolutionize the foreign exchange spot trading market.
Since our core US wholesale, inter-dealer business had been transferred to eSpeed, the next step was to ensure that Cantor Fitzgerald’s business would also rebound. In Europe, the inter-dealer business continued to prosper, but in the US we rebuilt our business on the foundation of our institutional equities block stock distribution and trading business. Because the support of our clients was unwavering, four days after the attacks, Cantor’s equities business had its busiest day in history.
Against monumental odds, Cantor returned to profitability by the fourth quarter of 2001. Throughout 2002 and 2003, we built on our successful foundation, and Cantor Fitzgerald now offers a broad array of financial services and products across the equity and fixed income capital markets, including large block accumulation and distribution in the equities markets, specialized distribution investment banking, market commentary and market data. We are once again a key player in the wholesale and institutional equities and fixed income markets. We are a different company from what we were, but an undoubtedly resilient and adaptive one. We have expanded our equity distribution specialty into the fixed income credit markets. Cantor Fitzgerald focuses on amassing large positions for clients across the credit spectrum or distributing similar positions quietly, without moving the market. This expansion added over 100 fixed income distribution specialists in 2004 alone. Our investment bank offers a specialized, world-class expertise in the distribution of large blocks of stock and fixed-income financing.
In October 2004, Cantor Fitzgerald spun off its remaining wholesale, voice-based, inter-bank brokerage business to create a new and separate company, BGC Partners, named after fixed income brokerage innovator B Gerald Cantor. This spin-off allows Cantor Fitzgerald to focus solely on its strong distribution and trading business and grow as a dedicated financial services provider to the institutional markets, while BGC can more effectively rebuild the inter-dealer voice business that was lost on September 11. BGC provides banks and investment banks brokerage services in wholesale fixed income, interest rate, foreign exchange and derivative markets worldwide. Today, BGC is already hundreds of brokers strong and is reclaiming the legacy that Cantor Fitzgerald held in the wholesale brokerage business before September 11, 2001. The partners of BGC also honour the legacy of Cantor Fitzgerald by participating in Cantor’s pledge to donate 25% of its profits through 2006.
Most importantly, the goal of supporting our families is successfully moving forward. As of December 2004, we had paid more than $157 million to the families of employees lost on 9/11, as well as covering their healthcare costs.
A principle of loyalty
The principles that gave us the strength to begin the painful rebuilding process remain strong within the company today. We hire individuals with commitment and loyalty to the company and its clients. We encourage the hiring of friends and relatives, but only if they are extremely capable. We consistently advocate a business philosophy built on exceptional customer service and loyalty to one another, and focused on vision and dedication to innovation. That focus not only allowed us to gain our initial foothold in the ultra-competitive capital markets, but also helped us earn the loyalty of thousands of customers when we needed them most.
Cantor Fitzgerald currently employs 690 people in New York and approximately 1,850 worldwide. The company is moving to new US headquarters in March 2005, where it is building premises for more than 1,200 New York employees.
While tragedy showed us that a majority of our staff, our headquarters and much of the technology that powered our business could be lost in one day, it also underscored that no single event, no matter how catastrophic, could change the commitment of Cantor’s staff to each other, to our customers and, now, to the families of our friends we lost in the attacks. We continue to define ourselves – and redefine our businesses – around the precept of loyalty, commitment, service and specialized innovative financial insight into the global markets. This is why we survived and why loyalty to those we lost is the foundation of our future.
Howard Lutnick
Howard W Lutnick is chairman and CEO of Cantor Fitzgerald and chairman and CEO of eSpeed. He is a member of numerous boards, including those of the Fisher Center for Alzheimer’s Disease Research at Rockefeller University and the Guggenheim Museum.