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profits with little or no risk. Cantor knew his way around the convoluted tax code, and his interpretation of its finer points made him a master of tax shelters, straddles and other such schemes. Besides collecting Rodins, Cantor collected politicians. He and his wife, Iris, were among those to rent a room for the night at the Clinton White House. lPhotograph] Caption: Iris and Bernie Cantor The Park AvenueBeverly Hills high life. Many in the securities industry are like Bernie Cantor, prowling about for an edge, but Cantor broke from the pack of edge-seekers in 1972. The equities business was crowded, and, save for the Nifty Fifty, equities were drooping. The government bond market was less crowded and-handily-less tightly regulated.

Sensing opportunity, Cantor invested about $3 million in Telerate, an electronic data service that disseminated commercial paper interest-rate information. He also opened Cantor Fitzgerald Securities Corp., a wholesale broker-dealer of government securities now registered separately from his Cantor Fitzgerald & Co.

The way the government securities market had worked until that point was that wholesale brokers like Cantor arranged trades between primary dealers. The primary dealers dealt with retail customers-retail being in this case not the general public but big institutions, financial houses, large hedge funds and the like. There are currently around 35 primary dealers, mostly huge firms like Salomon, Merrill Lynch and Lehman Brothers. Why do they need wholesale brokers? To cover their tracks. The lion's share of the volume in government securities comes from the primary dealers trading amongst themselves. If a primary dealer is liquidating a huge position, it doesn't want that fact known, lest others, smelling a huge sell order, try to crowd ahead of it. By going through a wholesale broker, the primary dealer expects anonymity.

Enter Cantor. As a wholesale broker, Bernie did what his rivals hadn't thought of: He made the market more efficient by putting the bids and offers from primary dealers on Telerate's screen network. This made the market more transparent but preserved anonymity. Today there are plenty of other bond quote screens. But when Cantor first got into it, Telerate was an innovation. It filled a gap. Through the Telerate network of screens everyone could see-more or less in real time-what was going on in the Treasury market, though they couldn't see the names of the players. Cantor's timing was exquisite. Stocks were soon to turn dull, and they were to remain so for a decade. But as the federal deficit swelled, the government bond market boomed. Cantor moved in deeper, soon doing business directly with larger retail customers as well. He sold his controlling stake in Telerate for a huge profit in the early 1980s, but continued to milk it by charging it for the data Cantor supplied. Though the operation turned into a disaster for Dow Jones, it was one of the best things that ever happened to Cantor. Bernie's boy

Into this lucrative setup stepped young Howard Lutnick in 1983. Whereas Bernie had dropped out of college, Lutnick had a degree in economics from prestigious Haverford. But just a bit underneath the patina the young man and the old man were much alike. Cantor liked the kid. When he was just 24, an age when many young people are still in graduate school, Lutnick was trading for some of Cantor's personal clients. That was in 1985.

That same year Cantor let Lutnick start the Investment Strategies Group division of Cantor Fitzgerald & Co. Cantor was moving further down the distribution chain in the Treasury market, now dealing directly with retail customers such as regional banks, medium-size businesses, wealthy individuals and others. In December 1990, when Lutnick was only 29, Cantor named him his second-incommand and

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