The world’s biggest futures market operator will be shutting down nearly all of its open-outcry futures pits by the 2nd of July, indicating the closing bell on a once-rowdy tradition that has been in the lows since the rise of online trading.
The decision by CME Group Inc., announced last week expelled traders of their products ranging from livestock, grain, oil and gold respectively. Once the only way to purchase or sell a futures contract to hedge against the movement in price, open country-outcry trading is presently at 1 % of the total futures trading volume based on exchange operators.
Traders are bracing for the closure of the future pits after the advent of more business conversions from manual to automatic over the past two decades. Still, many were disappointed that the day finally came and they felt unsure about the future.
The closure will signal the end of an era for futures industry which manifested itself around the pits in Chicago. Traders made and lost hefty amounts of fortunes and conceptualised trading floors akin to a schoolyard.
When markets are slow which naturally occurs during the holidays, pit traders would solicit other ways to entertain themselves such as making bets on how many pizza slices or burritos a clerk could eat in a few minutes. Accordingly, when conflicts arose, they often times came to blows earning their character as a rough-and-tumble group.
Over 20 years ago, the pits were energetic when it was much busier. CME’s largest rival, Intercontinental Exchange Inc., in 2012 kept mum 142 years of open out-cry trading in New York when it shutdown the trading rings for cocoa, sugar and other consumable commodities.
More than a decade earlier, the London International Financial Futures Exchange became the first primary futures house to leave the open outcry when it substituted abruptly to all-electronic trading.
The London Metal Exchange, which is the largest and most seasoned metal exchange, has committed to maintain its open-country trading active. The 138-year-old exchange is the only financial market in Europe that still utilises trading floors with traders standing in the “ring” -a circle of padded red leather seats- using arcane hand gestures and signals in intense sessions along with rowdy voices.
At CME’s exchanges which includes the Chicago Board of Trade, the New York Mercantile Exchange, the Chicago Mercantile Exchange and Comex, open-outcry volumes are on a steady decline since the first electronic platform for trade were made on the company’s Globex trading platform in back in 1992.
Moreover, CME will be keeping its S&P 500 futures pit primarily because they want to provide an important avenue for trading of underlying contract for the open-outcry S&P 500 options of the company.
The equity index futures pits and options pits for contracts traded on the Dow Jones Industrial Average and Nasdaq-100 Index will be closing by June 19 of this year. All other future pits will soon be shutting down by July 2 according to CME.
Future traders elicited their sentiments that they will be missing the camaraderie of the pits where some families have since worked for generations.