On February 4, 2015 the CME announced that they were closing all their futures pits, except the S&P pit, effective July 2, 2015. The options pits will remain open for the time being. This is the end of an era and the end of opportunity for so many.
Thirty five years ago I saw an ad in the Wall St. Journal. “GNMA Trading Permits” at the Chicago Board of Trade, available for $250 per quarter. My closest friend and I couldn’t pass up this opportunity to escape our boring hum drum jobs. It was fun, exciting and lucrative. Standing 7 hours a day is hard work but it was much better than sitting at a desk 7 hours a day, any day. It was a great career choice for me and for so many.
The Chicago Board of Trade was founded in 1848. For a 150 years all trading was done in person, face to face, by open outcry. As computers came of age in the 1990s, electronic trading began to take hold. The floor traders did everything in their power to preserve their way of life. In the final outcome, you can’t stop progress. Electronic trading prevailed.
Over these many years, I have met some wonderful people (and some not so wonderful). I often marvel at the fact that some people are natural traders. Some people could walk onto the trading floor and figure it out immediately and some never could. The only way to tell if you have the knack is by trying. Education, intelligence and experience are irrelevant. In fact they might be negatives. It is some innate talent that separates the successful traders from the rest of us.
The trading floor was the arena that allowed those truly talented traders to prove themselves. Money was the sole measure of success. Now that arena is closing and that opportunity is ending. The next generation of traders will likely be PhDs in engineering or computer science or they will be high school drop outs who are addicted to gaming. Whoever it is, it won’t be the same.
Many of the people that I traded with were 2nd, 3rd, 4th and even fifth generation floor traders and brokers. One fellow told me the story of how his great grandfather was a waiter at the Palmer House restaurant and every day a group of guys would come in for lunch and always leave a large tip. One day he asked what they did. They took him under their wing at the CBOT and his great grandson is still a CBOT member.
For many people, the CBOT was the alternative to college. You finished high school and got a job as a runner for your brother or cousin. In a few years, they would back you for membership. If you couldn’t make a living trading, they would find a way to get you a brokerage deck. Good pay and short hours. But that opportunity is going away.
The only thing left on the floor will be the options pits and that is a whole other ballgame. Option trading requires large amounts of capital and a lot of support. Option traders are a different breed than futures traders. They are more cerebral and more disciplined.
It’s the end of an era and the end of a great opportunity. I’m very sorry it won’t be around for the next generation of traders.
Anonymous