Commodity traders in Chicago and New York aren’t ready to call it quits even after CME Group Inc. shuts most of the futures pits in both cities.
Some brokers and traders will rent booths as office space to trade futures electronically as more active options pits for energy to grains stay open. The owner of the Chicago Mercantile Exchange and the New York Mercantile Exchange announced the decision in February because open outcry deals accounted for just one percent of futures volume.
“We are still going to stay in business on the floor,” Roger Smith, a 60-year New York copper broker who’s been trading on the floor since 1983, said by phone July 1. “We still have information we can give long-time customers” from sitting among peers and near the active options pits, though it may be a little harder to get, he said.
Smith will commute from his Long Island home to the Nymex in lower Manhattan to trade electronically from a booth on the trading floor.
The open outcry system, which dates back to the 19th century, involved hundreds of traders crowded around a sunken floor, yelling and using hand signals to trade everything from crude oil to pork bellies. The chaos quieted over the past decade with the rise of computer trading.
“The New York Mercantile Exchange floor here is about an acre in size, there used to be 1,500-2,000 people,” said Jeff Grossman, president of BRG Brokerage. “Now, if you’re lucky, there’s not even 200.”
The average daily volume across its exchanges rose 6 percent in the second quarter to 13.3 million contracts from a year earlier, of which 88 percent traded electronically, the Chicago-based exchange owner said July 2.
“The last day for most open outcry futures trading is expected to be today, pending expiration of CFTC review periods,” Chris Grams, a spokesman for the CME, said in an e- mail Monday.
Things won’t change much with the shutdown of the three big pits in the agriculture room for wheat, corn and beans, Scott Shellady, Chicago-based senior vice president of derivatives for TJM Investments Inc., said by phone June 24. “We’re going from playing football on a field to playing it on a Playstation II. We’re still playing football.”
In New York the electronic-trading booths will stay where they are on the floor. In Chicago, CME will be consolidating the grain options room into the financial room this fall and has received 420 requests for desks in that new location.
The move will mark a new era for Virginia McGathey, the 56- year- old known as the “girl on fire” in Chicago because of the flame emblazoned on her trading jacket. She started off as a runner at the age of 16 in 1975 before becoming a broker and then incorporating her own company, McGathey Commodities, by 1987.
“I was so excited when we started using computers in the 90s,” she said. “I didn’t know it was going to become the market.”
The desk of her family business, including her brother Ronald and niece Veronica, is set up right in front of the wheat options pit. It will be cut in half when she moves on Labor Day weekend to the Financial Room.
Traders and brokers said ending open outcry to rely entirely on electronic trading does carry some risk.
“I’m waiting for the first computer glitch when business can’t be done and they’ll say, ’What about the human element?,’” said BRG’s Grossman.