Monday, February 9, 2015

End of an era...CME Group closing down trading floors. I'm glad I got to experience it in its heyday.

Last week the CME Group announced that it was closing down its trading floors. When I heard the news I became a little bit sad and nostaligic. Although I knew it was just a matter of time, it was still personal for me because I spent ten years in the 80s early 90s trading in the "pits" on the floors of four exchanges: CME, NYMEX, COMEX and NYFE. I was lucky, I got to experience the wild world of open outcry trading. It was an experience I wouldn't give up for anything. I have so many stories I could tell. There were so many characters, many of them quite colorful.

In the past year I have been taping my webcast for Hard Assets Investor at the CME Group in New York, which was formerly the NYMEX. To put it mildly there's not much going on there anymore. You basically walk into a cavernous room, somewhat dark, with an arrangement of trading pits that are sparsely occupied. It's so quiet you can practically hear a pin drop. (More likely a computer hard drive humming.) It's ironic because some of these spaces used to hold records for largest indoor, unsupported structural rooms in the world. Like the CME in Chicago, for example, where I traded S&P's from 1991-1993.

The activity used to be insane. Large pits filled with NFL-sized traders, standing shoulder to shoulder, screaming, waving arms and hands, cursing, spitting, flinging pens and sometimes fighting. It was wild. To the casual observer it looked like sheer chaos, yet out of that chaos came incredibly ordered price setting for commodities and financial instruments that were bought and sold all over the world. Literally trillions of dollars in global capital flew through these pits every year. What an experience it was.

The CME's decsion I'm sure is an economic one: only something like one-tenth of one percent of their volume is done open outcry nowadays. The rest of it, which means pretty much ALL of it is done via computer.

I remember back in 1991 when I was going through membership on the CME, we had to take a week-long course. At the end of that course the instructor took us all into a back room where we saw a bunch of green screen computer terminals sitting on desks. That's when he said to us, "This is called, Globex, our electronic trading system. One day we will be doing the majority of our trading over this system."

We all laughed, as if to say, "Yeah, like that's ever going to happen."

As optimistic as CME officials were back then I don't think any of them dreamed that electronic trading and the technology behind it would change the industry as it has, literally bringing about the end of a 150-year old tradition of open outcry.

Next up, I'm sure is the NYSE. Maybe not next week or next year, but that day is coming and for many people it will be even harder to accept. That's because if there's one ultimate symbol of global finance capitalism it's probably the New York Stock Exchange. And when they close it some real estate developer will probably turn it into expensive condos for billionaires. (Trump?)

Anyway, goodbye floor, it's been fun.

Maybe one day I'll give a seminar and talk about all the crazy times and the people.

3 comments:

mike norman said...

By the way, the floor of the NYSE is dead quiet these days, too. It pretty much just serves as a broadcast studio for CNBC and other networks. The floor brokers just sit around reading newspapers. Oops...I mean reading the paper off their computers.

The Rombach Report said...

Mike - I used to work for the CME out of the New York office back in the mid-1980s when the CBOT was their cross town rival and the COMEX, NYMEX, and the NYBOT were separate entities. Before working for the CME I was employed by HSBC in corporate foreign exchange and they were known for publishing very splashy annual reports. HSBC's 1982 annual report featured a center fold photo of a live futures trading ring with brokers and local traders yelling, screaming and waving their hands signals in all their brightly colored jackets. The narrative under the photo was that HSBC operates in markets around the world to access globasl liquidity for their clients, blah, blah, blah... However, if you looked closely in the photo you could spot Dan Aykroyd and Eddie Murphy from the movie Trading Places among the traders in the ring.

mike norman said...

No way??? Ahahahaha!!! Well, then again, it's HSBC!