We all know the rise of the machine has dramatically changed trading, sometimes for the worse, but a recent story from Reuters shows some insight and gives data as to just how painful a death the open-outcry system is suffering. The most recent downturn in business for floor traders and brokers came in June of 2012 when the CME Group-owned Chicago Board of Trade changed the way it calculates closing prices. The new procedure called for incorporating electronic prices, rather than relying on the pit, thus rendering traders useless at the end of the day. The rule change at CBOT lead to an instant decline in open-outcry volume.
Open-outcry volume in corn futures, the biggest of the Board of Trade’s cornerstone agricultural contracts, sank to an average of 3.3 percent of total volume, or 181,599 contracts per month, in the year after the change, according to CME data. It had been 6.8 percent in the year prior to the change.
Recently the Intercontinental Exchange closed trading pits in New York for sugar, cocoa, and other soft commodities, which was just one in a long line of similar activity. While the loss of business for floor brokers is saddening, they will find ways to adapt as they too move to “the screen.” The most disheartening aspect of this electronic revolution is the loss of such a fundamental iconic aspect of raw capitalism that was ingrained in Americana. To hear Patrick Hillegrass describe recent floor tours he has given to visitors, you can see how his world has changed after 31 years of elbow-to-elbow trading.
“I feel like I’m taking them through a wax museum,” Hillegass said recently from a seat in a row of nearly empty trading desks on the trading floor, his electronic tablet on the desktop in front of him.