When Jim Stevens finished his studies at Elmhurst College in 1963, his family presented him with a fantastic graduation gift: a Chevrolet Corvette. Many young men would have taken off and cruised the countryside in the new sports car. But Stevens drove in a different direction. He sold the car to raise funds to trade on the stock market.
Stevens, a Barrington resident, has always been something of a buccaneer. His computer is emblazoned with a bumper sticker that reads “Legalize Capitalism.” It was a present from a like-minded friend. Today, Stevens heads a Barrington-based investment firm, Arbor Trading, that routinely trades close to $40 billion worth of government-backed bonds every year for institutional clients and individuals with deep pockets.
“I think Jim wanted to trade the moment he came out of the womb,” says Dave Juhre, a friend who is vice president of On-Line Innovations, a software company in Barrington.
Though he has had quite an adventure so far, the 54-year-old’s most interesting times may be just ahead of him. Stevens has just developed a software program that allows people to obtain trading data about financial instruments over the Internet in real time and also gives clients access to Arbor’s research files. The development may start something of a revolution in the financial industry, and at the least tilt more of Wall Street’s daily volume in the direction of the northwest suburb where Stevens works, lives and plays.
Stevens’ brainchild, called Open Dialog, lets investors use the Internet to access the data on computers at Stevens’ Barrington office. The staff of about 25 then handles trades for customers who might be in London, Geneva or Singapore.
“Showing someone your research is the key to the sale. You have to show that you have better information than your competition,” Stevens says. “The Internet puts us on an equal footing — or better footing — with competitors around the globe.”
One user, Mark Straub, vice president and controller of PlainsBank of Illinois in Des Plaines, one of the largest community banks in the northwest suburbs, is enthusiastic about the software and Stevens. “It is a great invention. It already has saved us money. If we make just one trade a month using it, it is helpful,” Straub says. “Jim is amazing, a genius, for inventing this. He’s a clever guy.”
Stevens’ invention was several years in the making. Back in the 1980s, he and his colleagues would fax customers copies of the charts and graphs that they created to show their predictions about the price of bonds.
But comparing faxes on the phone with someone half a world away was often frustrating. So Stevens developed a proprietary program to share the information via a computer. But not every customer had the equipment to handle the program. The program would often crash and force Stevens to spend hours and hours trying to bring back the systems.
Then came the Internet. All of Arbor’s customers quickly hooked up to the Internet to send e-mail and other files. So Stevens designed Open Dialog, which would let customers and his salespeople share the same data files at the same time.
“We provide the information for free to the customer and make the commission off the sale,” Stevens says.
The software is still in its early stages, being tested around the world by Stevens’ clients. Stevens said a central bank of a leading country may even use it soon (central banks are the foreign equivalent of the Federal Reserve in Washington, D.C.). Stevens is also exploring a way to license it to another company that deals in stocks exclusively, so they can provide the real-time stock data to small investors.
“The computer has been something like a telescope for us,” Stevens says. “It allows us to do things we couldn’t do with the eye and the hand alone. That’s why we got into computers early. That is our calling card.”
Adds Ivy Schmerken, editor-in-chief of Wall Street & Technology, a trade magazine that has tracked Stevens’ exploits: “He’s a very sophisticated guy, working in a sophisticated business. You have to analyze trends to compete, as well as have a good price. Selling today is more complex than it used to be.”
How is it that Stevens is poised to boost the profile of Barrington on the world’s financial map? This wasn’t all part of some grand plan, and though to friends he may seem to have been in the business since birth, Stevens started out on a completely different track.
Born in 1943 and raised in the St. Louis area, Stevens moved to the Chicago area in the early 1960s when he enrolled at Elmhurst College as a geography and philosophy major. A geography instructor at the college, whose avocation was the financial markets, got young Jim hooked. “He was a big speculator on the markets,” Stevens recalls.
The encounter with stock trading would change Stevens’ life, moving him from rock formations to interest rates. “That got me interested in it,” he says.
He went to graduate school at Washington University in St. Louis and took an accelerated course to complete his MBA in 15 months rather than two years. In fact, he finished six full years of college, graduate and undergraduate, in four years. “I wanted to get out and get going,” Stevens says.
Most students in his position jumped at the chance to meet with job recruiters when they came to campus, but Stevens didn’t. Instead, he wrote letters to all of the companies he wanted to work for and waited for a reply. One inquiry came from the First National Bank of Detroit. That bank promised to pay part of his transportation costs to the interview, so he was off and eventually landed the Detroit job, where he started out trading government bonds. These bonds are what finance the workings of the U.S. government and, with the U.S. escalating the growth of government through deficit spending back in the 1960s, Stevens was in the middle of it all. Information was the key to success; if he had better insight than the competition, he would land a deal. If he did not, he wouldn’t.
Another job eventually materialized with Loewi & Co., a Milwaukee-based investment firm that at the time also had offices in Elgin and Chicago. Eventually, Stevens and some coworkers came up with an idea to launch a new division of the company to sell U.S. bonds globally by providing research to prove their value. At a meeting to approve the proposal, Stevens’ boss said: “I don’t know what the heck they’re talking about, but they do. Let them do it!” Stevens recalls, laughing.
Living in Barrington and commuting to LaSalle Street by train every day was a tiresome task. Stevens, who, with his wife, Judy, has four children (now grown), kept up the pace for several years. By 1976, he started Arbor Trading with a friend, Dick Chambers, and several other LaSalle Street counterparts who also longed to work closer to home.
Basically, they did what they always had done at Loewi, but on their own and with their own twists. It was the dawn of the information age, and financiers were starting to use computers to get an edge over the competition. The older dogs at his old firm didn’t like the new technological tricks, so that’s why it made sense for Stevens and his pals to head out on their own.
“When I was younger, I used to like the trading part of this. But now, the more interesting part of this is the creative part: the technology,” Stevens says. “One day, I realized that being in the bond business without computer-based tools was like backing your car into the garage without a rearview mirror. We’re really in the computer and technology business. It is analysis. That is how all of this has come about.”
Stevens, to use the Silicon Valley slang, is definitely a “bit head.” He can talk bits and bytes and bandwidth with the best of them. He is completely self-taught, consuming computer magazines and software instruction manuals with the ease most people have with the newspaper.
As a small company, by Wall Street standards, Arbor does not finance bond offerings. Rather, the firm sells them to leading clients. The key to Stevens’ success — and that of the 25 or so employees at his firm — is to provide unique analysis, showing his clients trends they haven’t seen or heard of elsewhere. That’s where the computer comes in.
Other bond traders could conceivably develop their own versions of this software and give their clients information over the Internet as well. But there is a major hangup: money. Wall Street usually charges its clients high fees — tens of thousands of dollars — for access to such information, Schmerken said.
Stevens, though, is a scrappy, smaller competitor who has never made money by selling his research. He views his invention as a means to an end: a way to get customers to find out what is right for them to buy.
Stevens’ friend Juhre, a software developer, believes the invention just might be a big enough hit to make Stevens the Baron of Barrington.
“This guy is really something; he’s had an interesting ride already,” Juhre says. “I’ll bet the best is yet to come, though.”
