Michael S. Green/AP
Traders work in the bond pit at the Chicago Board of Trade in 1995. In recent decades, much of the trading has left the pits and gone electronic.
Traders work in the bond pit at the Chicago Board of Trade in 1995. In recent decades, much of the trading has left the pits and gone electronic. Michael S. Green/AP
The trading pits at the Chicago Board of Trade and the Mercantile Exchange have long been potent symbols of American capitalism. And they used to be as rough and tumble as the city itself, where burly men bought and sold commodities like hogs, cattle, corn and soybeans.
Trading volume has gone up considerably in recent years, but Chicago's trading pits are tamer places today — the result of a revolution futures trading has undergone over the past quarter century. Much of the trading has left the pits and gone electronic.
In the hurly-burly of the trading pit, traders use shouts and hand signals to make their deals. The signals developed over time from the mid-19th century, when the Chicago Board of Trade was established.
As electronic trading replaces the "open outcry" system of the trading pits, the hand signals are edging toward obsolescence. Some exchanges have closed derivatives trading pits altogether, and it may only be a matter of time before open outcry becomes a thing of the past. Trading Pit History has galleries that show the hand signals.
In the chaos of the trading pit, traders would do what they could to get an extra edge. One man even sold men's platform shoes, which gave traders up to 3 extra inches to get above the crowd. But the company that made the shoes, B.A. Mason, discontinued them when sales shrank.
— Christopher Connelly
Thirty years ago, if the country were in the middle of a historic drought as it is today, the corn options pit on the floor of the Chicago Board of Trade would have been the center of the action. But instead, it's pretty quiet.
"The volume as far as yelling and screaming was much, much louder," says Chicago trader Scott Shellady. "You almost couldn't hear yourself think."
He says the scene when he started trading in the 1980s was barely controlled chaos.
"All of those pits would have been teeming with people," Shellady says. "Much to the point where I would leave at the end of the day and I would have the sweat from the back of the man in front of me on my chest, and the sweat from my back on the chest of the guy standing behind me. That's how tight we were, we had to hold our hands over our heads."
Now, there are fewer traders and less clerical staff. There's also less paper: Today, the most popular way to get information is tablet computers. Shellady says it has made things are more civilized. Gone are the days when traders had to fight to place their orders.
Shellady says he felt like an athlete taking to the field when he walked onto the trading floor. Now, he says, it's much less athletic, and the traders actually look different.
"Back then you would be recruited because you were 6 foot 6 and had long arms and had a big voice," Shellady says. "The type of trader has changed so now we have got more slight, more academic, smarter kids from MIT and Harvard and Yale, when we used to have football players from Illinois and Michigan and Notre Dame."
The Board of Trade and the Chicago Mercantile Exchange, the two biggest exchanges in Chicago, merged in 2007 to form the CME group. They operate out of the old Board of Trade building.
Although many have predicted computerization would mean the demise of open outcry trading in Chicago, Shellady says that some traders' expertise can't be replaced by a screen, at least not yet. For example, packaging a variety of derivatives is still hard to do on a computer, he says.
"Voice to voice down here, looking at people, it's much easier to get it done that way," Shellady says. "So you'll find that a lot of those things are still done open outcry. And the easy stuff ... you'll find that that stuff goes on the screen."
If you ask the traders when open outcry will go away, some say never; some say five years from now. But they've been saying five years from now for over 20 years.