Last week’s announcement that CME will close most of its trading pits caught some by surprise, but it shouldn’t have. We all knew this day was coming, but it doesn’t take the sting out of it. Next month LME also intends to make the call whether to close its ring. Before the world discovered that computers could connect traders from around the globe, the open outcry pits of Chicago, London, and New York were where markets flamboyantly flourished and the wisdom of crowds came to discover prices, allocate capital, and hedge risk for agricultural, energy and financial instruments.
I vividly remember the first time I went on a trading floor. It was 2003 as a newly appointed CFTC Commissioner and Pat Lynch—then treasurer of the CME—brought me down to the open of the Eurodollar pit. I can only describe the experience by the vibration I felt in my chest from the thunderous sound the moment trading began. The pit had a life of its own where the whole was greater than the sum of its parts. Somehow this chaos miraculously brought order and pricing to markets and at that moment I was hooked.
Understandably, last week’s announcement was most acutely felt by those who grew up in the pits. So many members of the futures and options industry started their careers on the floors of an exchange. They gained their market street-smarts and connections serving as runners, clerks, and traders, proudly knowing their role was an important cog in the overall price discovery machine. The trading floor was the ultimate internship, giving a generation of industry professionals a real-world experience filled with colorful characters and practical skills.
Most importantly, the trading floors launched a lifetime of friendships and business relationships that will last long after the floors are gone. I am always struck by the collegiality of this shared experience. When floor traders get together, it is always filled with uncontrolled laughter and tall tales from days past. They share a bond that many of us can only appreciate and envy from afar.
While we look back with nostalgia at the floors, let us also be realistic about why they are going by the wayside. Electronic markets have democratized trading in a way that open outcry could never deliver. Electronic trading has significantly lowered costs and opened access to our markets beyond the clubby nature of the pits. The floors were places where physical attributes mattered. Let’s admit it—that meant mostly white and male traders with all the testosterone hijinks that came with it. The anonymity of electronic trading has broadened the talent pool to a more inclusive group of the best and brightest, no matter their background and upbringing. That is a positive development.
That said, we must find ways to replace the proving ground of the trading pits. How can we train the next generation of traders and market professionals who are interested in our esoteric markets and give them an on-ramp to our industry? The answer lies in education and internships. Through efforts like Futures Fundamentals, the Lothian Summer Intern Series and the Greenwood Project, we are finding ways to provide knowledge, experience and opportunities for the next generation. These kinds of investments are imperative for our industry’s growth and survival.
One way to recognize and celebrate the passing of this era is to support John Lothian’s Open Outcry History Project. John has taken on this project of love to capture the voices and stories of the golden era of trading before these individuals are gone…and some already are. I plan to give a second donation and I hope others will too.
We are fortunate to work in a great industry that feels like a family, complete with all its emotional connections, mutual experiences and inside jokes. The trading pits are a rich part of our family history that we share as a community. With this announcement, we pause to mourn the loss of the trading pits but what remains is a sense of gratitude for all they have spawned in their place.