Floor trading in the “trading pits” (face-to-face trading) is sadly a dying art, however we do still have examples of this great art… but for how long?
Examples of markets which use this system in the United States are the New York Mercantile Exchange, the Chicago Mercantile Exchange (CME), the Chicago Board of Trade, and the Chicago Board Options Exchange. In the United Kingdom, the London Metal Exchange still makes use of open outcry. Source: Wikipedia
Below is an extract from an interesting article published by Crain’s Chicago Business
What little action remains on CME Group’s downtown trading floor emanates mainly from one corner: the eurodollar options pit.
The trading floor, with 35 pits covering nearly 2 acres, once was the heart of the world’s futures market, with screaming, gesticulating traders setting prices for everything from cattle to soybeans to interest rates. But now about 90 percent of CME’s volume trades on the company’s electronic platform, leaving many pits quiet and rows of desks around them sitting empty.
By contrast, floor traders consistently handle 77 percent of eurodollar options orders. Nevertheless, with CME under pressure to cut costs—its major rivals, Intercontinental Exchange and Eurex, don’t even have trading floors for futures—the last vibrant “open outcry” pit is helping keep the floor open, for now.
“It’s not a question of if, it’s only a question of when,” says Richard Sandor, a former chief economist at the Chicago Board of Trade.
CME Executive Chairman Terry Duffy has made clear he has authority to close the floor anytime. During a November meeting with reporters, he said any pledges to members to keep the pits open lapsed years ago. That point was underscored by CME’s legal victory this year over grain traders who sued the company over unfavorable changes to pit rules.
