Business
1:27 am
Tue September 25, 2012

Chicago Pits Quieter, But Traders' Outcries Linger

Originally published on Tue September 25, 2012 6:18 pm

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.

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.

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Transcript

DAVID GREENE, HOST:

The trading pits at the Chicago Board of Trade and the Mercantile Exchange have always been potent symbols of American capitalism. Like Chicago itself, they were rough-and-tumble places. You had to be made of stern stuff to wade onto the crowded pits and bark out orders for commodities like hogs, cattle, corn and soybeans. Well, in the last quarter-century, futures trading has undergone a revolution, as NPR's Sonari Glinton saw firsthand.

SONARI GLINTON, BYLINE: I'm standing on the floor of the historic Chicago Board of Trade. It's the middle of the trading day, and I'm looking down in the corn options pit. Now, what's interesting about this pit and this day is that we're in the middle of an historic drought and normally when there's a drought or there are extremes in weather, this is where all the activity would be, but now, today, it's relatively quiet.

SCOTT SHELLADY: The volume as far as yelling and screaming was much, much louder. It was - you almost couldn't hear yourself think.

GLINTON: Scott Shellady trades at the CME Group on the floor of the Chicago Board of Trade. Shellady is referring to the '80s when he came to work on the floor. Just to give you an idea of how loud it was, let me play you a piece of tape.

(SOUNDBITE OF MOVIE, "FERRIS BUELLER'S DAY OFF")

CROWD: (Yelling and screaming)

GLINTON: That's from the movie "Ferris Bueller's Day Off," when Ferris and his friends visit the Mercantile Exchange. Notice the difference. Shellady says the movie gets it right; it was barely controlled chaos on the floors.

SHELLADY: In 1988, both of those pits, all those pits would have been teeming with people, much to the point where I would leave at the end of a day and I would have the sweat from the back of the man in front of me on my chest. And my - 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 head.

GLINTON: Now, there are fewer traders. There's less clerical staff. There used to be runners picking up papers; traders would carry big books, lots and lot of paper. Now, the most popular way to get information is with tablet computers. Shellady says things now are more civilized.

SHELLADY: It was like a stadium and when I would come through those two double doors, that was like coming out of the locker room and you take your position on the field. It's very, very competitively athletic.

GLINTON: And now, it seems like - this doesn't seem athletic right now.

SHELLADY: No. And I'll tell you the biggest changes, which no one really talk about, is the fact that back then, you would be recruited because you were 6'6" and had long arms and had a big voice. The type of traders changed, so now we've 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.

GLINTON: The Chicago Board of Trade and the Chicago Mercantile Exchange, the two biggest exchanges in Chicago merged a few years back. They formed the CME Group and operate out of the old Board of Trade building. A lot of the trading has left the pits and gone electronic. Trading volume, though, has gone way up in recent years, and many have predicted computerization would mean the demise of open outcry trading in Chicago.

Shellady says there's still some expertise that's in the heads of traders you still need. He says there are some things you can't do on a computer screen - yet.

SHELLADY: I want to buy this, sell this, buy this, buy this, sell this, sell this, buy this. All different strikes. All different derivatives and you want to package it as one. That's really hard to emulate on the screen. But voice to voice down here, looking at people, it's much easier to get it done that way. So you'll find that a lot of those things are still done open outcry. And the easy stuff, like I just want to buy a thousand of these, you'll find that that stuff goes on the screen.

GLINTON: If you look around on this floor and you ask the traders when open outcry is going to go away, some would say never, some would say five years from now. They've been saying five years from now for over 20 years.

From the floor of the historic Chicago Board of Trade, Sonari Glinton, NPR News. Transcript provided by NPR, Copyright NPR.

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