Another nail in the coffin was hammered in Wednesday for open outcry trading. CME Group Inc. announced it is shuttering most of its futures trading pits in Chicago and New York, as Borg-like electronic trading has all but assimilated trading floors.
The move will be completed by July 2, 2015, marking the end of an era of floor traders clamoring and climbing over each other in a mountain of buys, sells and haggling—an era lasting close to 150 years.
CME will keep some pits open, such as the S&P 500 futures market and the market for options on futures, the latter remaining active on both the floor and screen due to the complexity inherent in constructing contracts with multiple options. In Chicago, all options pits will be located on a single floor in the company’s Financial Room by September.
Otherwise, trading floors have been reduced to little more than novelty in the past few years as electronic markets have made trading faster, cheaper and more traceable. ICE (Intercontinental Exchange Inc.) keeps its Manhattan-based NYSE Group stocks and options trading floor open, for its part, but largely because issuing companies love ringing the bell over the trading pit—surely reveling in their ability to grab the attention, albeit ceremoniously, of a boisterous and otherwise unwieldy market.
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CME was born when the Chicago Mercantile Exchange merged with rival Chicago Board of Trade in 2007. Chicago Board of Trade’s pioneering octagonal pit, opened in 1870, became a world-leading agricultural commodities trading venue throughout the 20th century. Later it also became a hub for currency, interest rate and stock index contracts.
But open outcry futures volumes have declined to just one percent of daily futures volumes. Last year CME traded 31 million futures on its floors in Chicago and New York, compared with 2.66 billion futures on its electronic platform, Globex. Floor personnel numbers have likewise dwindled in recent years to about 1,200 in Chicago, from a peak of over 10,000 personnel in the 90s.
In floor-trader language, palms in mean “buying” and palms out mean “selling.” Price is indicated with outstretched arms and quantity with hands close to the face. But soon this unique hand-signal language invented in Chicago will join the dead languages, and floor traders will pack up their bags, head home, and log on to their computers.