New York has alway been know for the NYSE, COMEX and the NYMEX, but over the last two decades both the business and floor trading has shrunk as electronic trading replaces humans on the floors. The trend started at the NYSE in the early 1990s as the exchange shut down one room after another. In 2006 when the Chicago Mercantile Exchange bought the Chicago Board of Trade, the MERC closed its trading floors at 30 S. Wack and moved to 141 W Jackson, and redesigned the floor to form the ‘combined’ trading floors of the CME Group. I remember walking on to the new trading floor of the old Chicago Board of Trade and remembering being a runner in the grain room, which was called the Henry Mansfield room, and all the traders, order filled and desk and exchange people. I also remember, despite having electronic quote boards, they had the ‘cat walks’ open with chalkboards as a back up. When I finally started working phones, I remember going from the grain room to the bond pit. I worked the phones for Gary Bielfeldt from BL&H and Rick Barnes (Ricky the Rocket) and having to fight everyday of my life to form the largest S&P desk operation, according to monthly volume statistics provided by the CME. There was no place, nor will there ever be another place, where a street kid with no education could turn out like it did.
Most traders say it was good fun working around so many other liked minded people while others are still complainings about electronic trading. Most of the floors traders had a ‘this will last forever’ view, and it did for many, but things started to change in the early 1980s. 99% of the people in the industry didn’t even know that the charge back then that was right under their nose would come back to be the driving force that would eventually take over the market place.
Long before electronic trading was something call program trading. Where a trader at the back could spread between the S&P 500 cash and the S&P 500 futures using baskets of stocks. At first it was very obscure, it didnt change the volumes that much, so its possible the CME didnt even notice it, but as more and more banks and prop trading firms employed the practice volumes were clearly increasing. Sure electronic trading brought efficiency, but the birth of program trading, or S&P 500 index arbitrage, was the turning point that opened the door to other types of programs like HFT and Algorithmic trading programs that eventually competed and knocked it out. So who’s fault is it that most of the world’s trading floors are closed? I can tell you whose fault it is, it’s called the advancement of technology and no one, no matter how much was made in the pits, could stop that. In 1996 the CME turned the Globex switch on and that’s when things on the CME, COMEX and NYMEX floors went from this…
To this…
To this…
To this…
It’s Not Just the Pits that are going away
It’s not just the futures pits that are disappearing, a way of life and the tradition of the open outcry style of trading is too. The roar of the futures pits that once dominated the trading world are fading into the past. When I first started in the business there were over 550 clearing firms between the CME and the CBOT and hundreds more in NY. It’s all gone. The only thing keeping the floors open today are the options pits, and as it stands, there are more options trading online in most contracts and well beyond the volume thresholds set by the CME to remain open. Its is, as they say, a dying tradition.
The credit crisis didn’t just destroy Wall Street , it devoured LaSalle Street also. While much smaller in size than Wall St, LaSalle street was the heart of the city, where all the banks and brokerage firms were. After the credit crisis many of the empty store fronts were taken over by fast food places and cell phone companies. The 550 full clearing firms is now down to under 25, and only four or five will open an account for a small guy. Yes, the floor stayed open a lot longer than most people thought it would, but the dilapidated state of affairs suggest it can’t be that long until the CME starts shutting down some of the option pits.
In the end there is no one to blame, nothing stays the same forever and there is no stopping technology, but clearing this is a great example of how technology changed history.
The press releases put out by PR Newswire on April 13 closes another chapter of the trading floors…
CME Group to Close New York Trading Floor at Year-End
Company to Make Space Available for Floor Traders to Transition to Electronic Venue
Apr 13, 2016, 16:15 ET from CME Group
CHICAGO and NEW YORK, April 13, 2016 /PRNewswire/ — As declining open outcry options volume on CME Group’s New York trading floor now represents just 0.3 percent of the company’s overall energy and metals trading volumes, CME Group will close its New York trading floor at year-end, subject to CFTC review. All options products listed with and subject to the rules and regulations of NYMEX and COMEX will be available for trading on CME Globex, and for submission for clearing through CME ClearPort.
Since the company announced in Q1 2015 that open outcry futures trading in New York would end last Summer, average daily volume for remaining options products traded through open outcry in New York has further declined by 53 percent to just 7,500 contracts. Futures trading on the New York trading floor was discontinued in July 2015.
In addition, beginning in Q4 2016, CME Group will make space available for floor traders to transition to electronic trading at the company’s One North End Avenue facility in Battery Park, NY.
After open outcry trading in New York ends on December 30, 2016, the company plans to sublease its existing trading floor space, but will retain its existing office space in the building for staff.
CME Group’s Chicago trading floor will remain open for trading of options on futures contracts, as well as S&P 500 futures contracts.
As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. Around the world, CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its exchanges based in Chicago, New York and London. CME Group also operates one of the world’s leading central counterparty clearing providers through CME Clearing and CME Clearing Europe, which offer clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives. CME Group’s products and services ensure that businesses around the world can effectively manage risk and achieve growth.
CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT, the Chicago Board of Trade, KCBOT, KCBT and Kansas City Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com.
In Asia, 8 out of 11 markets closed lower (Shanghai Comp -1.44%), and In Europe, 12 out of 12 markets are trading lower this morning (DAX -0.01%). This week has a very low number of economic reports and a high level of earnings. There are a total of 13 economic reports (4 housing reports), 11 T-bill or T-bond auctions or announcements, 3 Federal Reserve banks presidents speaking (all today). Today’s economic calendar includes William Dudley, Neal Kashkari and Eric Rosen from the fed speaking and the Housing Market Index at 10:00 ET.
Say No to Doha and Crude Oil Production Freezes
Our View: I tend to take a straightforward approach to how I look at the world and the markets. When it comes to the world I thought it would be next to impossible to get Iran and the Saudis to freeze production when there are so many wars going on in the Middle East. As much as Putin wanted to get a consensus it’s just not going to happen. Oil production from the Organization of the Petroleum Exporting Countries (Opec) rose 40,000 barrels per day (bpd) to 32.38 million bpd in March, driven by sanctions-free Iran, according to data compiled by global research firm Platts. That my friends is not going to stop.
This week have a very low level of economic report and a high level of earnings ( GS, JPM, JNJ, CAT, YUM, GE, NFLX, PEP, APX & more ) As for the S&P we think it’s nearing a high / pull back but the volume has gone from almost 2 million contracts a day down to 1.2 million a day. Monday have not been good but Tuesdays have. Our view, we are leaning to selling the rallies with tight stops. Just too many sell stops below.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed lower: Shanghai Comp -1.44%, Hang Seng -0.73%, Nikkei -3.40%
- In Europe 12 out of 12 markets are trading lower: CAC -0.25%, DAX -0.04%, FTSE -0.22% at 6:30am CT
- Fair Value: S&P -6.47, NASDAQ -8.48, Dow -86.24
- Total Volume:LOW 1.2mil ESM and 2.8k SPM traded
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