The decision by CME Group to close many of its open outcry futures trading pits in Chicago and New York came in response to trading volumes falling to just one percent of the company’s total futures volumes. Though the decision itself was a long time in the making, as a consequence of more and more volume migrating to electronic trading screens that promise greater liquidity and price transparency, when the closing bell finally rang for the last time the mood in the pits was sombre to say the least.
Sentiments such as these are understandable considering his family’s long history on the trading floor.
As a member of the board of directors at the Chicago Mercantile Exchange (CME), Pietrzak knew that if the futures pits continued to transact less than one percent of total CME volume, as they had done for several years, that it would be one of the first places the exchange would look to make changes. When the CME began the process of stripping away over half of its 35 trading pits on July 2, it wasn’t just taking away a defining feature of the Chicago’s financial centre, but one of the city’s most popular tourist attractions. One of the main drivers behind CME’s decision to close pits was end users demanding access to greater levels of liquidity and transparency, along with wanting an ever-lowering of transactions costs, all of which are easily provided through electronic trading screens.
Traders nowadays needn’t rely on flashy trading jackets or their loud voice in order to buy low and sell high, nor do they require knowledge of the vast array of hand signals designed to communicate their position in the market. Since the financial crisis in 2008, risk-averse regulators looking to more closely monitor trading activity have acted as a catalyst for the development and proliferation of electronic trading, which is meant to offer greater market efficiency. But while many, including the regulators, favour the transparency offered by electronic trading, many senior traders with experience of both the pit structure and CME’s trading platform GLOBEX, assert that there is a lot of meaningful information on the floor that simply cannot be replicated electronically. The trading floor was once the place that provided the most market colour – those precious nuggets of information that helped investors and traders get a feel for the direction the market was heading that day.


But with the increased efficiency of electronic trading, offering greater certainty of price, and thus allow people to know more accurately where the market is at any given time has removed the need for such pricing proverbs. Before the shift to electronic trading human error and misinformation created a lot of inefficiencies, which added greater risk and instability to the market, something that many would like to reduce as much as possible. Ultimately, the move to automated systems will provide a far more efficient and fairer market for all, but there are concerns still about a market dominated by machines.
In the end, much of the fear surrounding electronic trading and the subsequent reduction of human element posing a substantial risk to the market are unfounded.
Regardless, of the pros and cons of electronic trading, it is the direction that the market has decided to take. But for those traders that had to say goodbye to the job they love in July, the CME showed why so many refer to it as their home from home, helping floor traders who want to continue trading by making booth space available following the closure of the futures pits.
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Thus helping to put the final nails in the coffin of a 167-year-old tradition that, for many, embodies the very heart and soul of the global financial market, in favour of the unparalleled efficiency and speed offered by machines.
His grandfather first started at the Chicago Board of Trade (CBOT) as a runner when he was just 13 years old ferrying messages between clerks and taking phone orders from customers that would then be passed on to brokers to execute.


Even so, the fact that it took as long as it did to shut down the pits, shows just how difficult a decision it was and what the tradition meant to all those involved. The frantic, frenzied style of trading that is a staple of the open-outcry futures pits saw traders hooting and hollering for attention, all the while throwing out bizarre hand signals that have become synonymous with the market itself.
Instead, they need to adapt to the speed of electronic trading, along with the many different strategies that allow them to gain the edge in a market where transparency is abundant. He admits that when he started on the trading floor back in 1979 that often the size of orders on the bid and offer side wouldn’t match up, causing a number of missed trades. But Pietrzak hopes and asserts that losing this common sense approach to the market needn’t be lost and could even be incorporated into automated systems over time. In fact, it is easily argued that behind every automated system is a person tinkering away.
Though it didn’t stop a small number of traders attempting to oppose the CME’s plans by requesting the US Commodity Futures Trading Commission (CFTC) to review the potential repercussions the move would have on the market. Meaning that the human element is still present, but instead of existing in a physical form on a trading floor is incorporated into the algorithms trading strategy in digital form.



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