Time to Close: Stories from Chicago's Famous Stock Exchanges

Original author: Lynne Marek
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Given that a month later [the original article was published in June 2015 - approx. transl.] many futures platforms will close, former and current traders decided to talk about their ups and downs.

On July 2, CME Group will close more than half of its 35 exchanges. This will be a big step towards the cessation of one of the types of trade, thanks to which Chicago once became a financial center in the Midwestern United States, and they began to think of this city as a place where enterprising traders can earn a fortune.

What futures will be closed?
CME Group plans on July 2 to close 20 of its 35 stock exchanges in Chicago and New York. Below is a list of goods traded on them.

  • Corn
  • Wheat
  • Soya beans
  • Soya flour
  • Soybean oil
  • Live cattle
  • Lean pork
  • Beef
  • Lumber
  • Goldman Sachs Commodity Futures Index (GSCI)
  • Milk products
  • Currency pair Euro / Dollar
  • Federal funds
  • US Treasury Bonds
  • Forex Futures
  • Dow Jones Index
  • Nasdaq Index
  • Gold / Silver (New York)
  • Copper / Platinum / Palladium (New York)
  • Energy Futures (New York)

Futures platforms arose with the development of agriculture and the construction of railways. In connection with the growth in the supply of wheat, corn, beef and pork to the city, a certain market has formed. Then, in 1848, the Chicago Board of Trade (CBOT) was founded by businessmen, and later, in 1874, the Chicago Agricultural Exchange, the forerunner of the Chicago Mercantile Exchange (CME). In the spacious exchange halls of a man — at that time only men were there — they shouted and turned in different directions to buy or sell contracts for the supply of various goods in the future.

November 2014 Traders in the pit for trading options on the Euro / Dollar currency pair, the most active pit

As a result, in order to shelter the restless crowd of the Chicago Board of Trade, a 45-story building was built at the intersection of Jackson Boulevard and Lasalle Street. And on June 9, 1930, after US President Herbert Hoover clicked on a symbolic button in Washington, trade began. In 2007, after the merger of CBOT and CME, their common trading floors appeared in this building, and the CME “pits” for Walker Drive were abolished.

In the last decades of the 20th century, trading floors were filled with thousands of traders who crowded in the stock pit. From there, from an aggressive crowd, they gave signals with gestures and shouted their warrants. Many traders wore bright jackets to stand out in the “pit” and attract attention. And exchanges introduced futures contracts for financial instruments such as bonds and currency pairs, as well as futures options, offering companies and farmers the opportunity to protect themselves from jumps in market prices.

For decades, brokers and traders from Chicago have traded billions of contracts, making their city richer. Exchanges were not only a major trading center. As CEO of Chicago-based Cheiron Trading Larry Schulman notes, they also offered any young man with “perseverance and a share of innate talent” a full-fledged career and a real opportunity to make good money.

The growth of e-commerce is pushing workers out of stock pits. Traders, brokers and other workers are leaving the pit due to the fact that over the past ten years, the volume of electronic trading on CME has increased dramatically. Source: CME Group. Note: Data are for fiscal year.

Today, several hundred daredevils are located on 2 acres of one of the 30 “holes”, desperately trying to save the “cry system” from extinction. For some time now, the most active option pits will remain open.

CME is still the world's largest futures exchange, but over the past 20 years, traders and trading firms have gradually shifted to computers, thereby increasing the share of electronic trading up to 90%. E-commerce continues to grow and with the development of high-speed communications is no longer limited geographically: many firms were founded far beyond Chicago.

The CME does not announce when it intends to close the remaining 13 sites, but when it does - and this is likely to happen in the next few years - the arena in which traders fought for their orders every day, and the community in which evolved their long-term relationship. Within the framework of this article, six people will share their experience in the stock pit and tell how important this is for them and for the city as a whole.


Note: here and below the video opens by clicking on the picture. Name : Jim Clarkson Company : A&A Trading Age : 58 years Role in the Pit : Broker Product Name in the Pit : Cattle Futures

"When the active movement began on the exchange, brokers were pushed out of the" hole ", and they had to make their way to it again." - Jim Clarkson

Jim Clarkson showed interest in trading back in college, and after graduation he began his career on the stock exchange as a messenger . runner ]. Soon he got a job with a broker, who in 1994 was accused of fraud and sent to prison, and the whole business went to Clarkson and his colleague. Their firm, A&A Trading, is currently executing orders to buy and sell cattle to farmers in the Midwestern United States.

In 1982, when I was just starting to work on the stock exchange, a “hole” for trading on the Euro / Dollar currency pair [probably, this refers to the European currency unit ECU, which was used from 1979 to 1998 and was the predecessor of the euro - approx. trans.] was so full that brokers were sent there at 6:30 in the morning to take a seat, while the market opened only at 7:20. When the active movement began on the exchange, brokers were pushed out of the "hole", and they had to make their way to it again. The excitement was incredible.

In the "pit" were a variety of characters. There were smart people with a bunch of formulas trying to overtake the market at the expense of their intelligence. There were also those who owned insider information: they tried to overtake the market due to these data and, being larger players, could influence the market movement. In this cauldron people with remarkable intelligence were brewed, people with connections, some had one and the other, and they all tried to earn money.

The exchange brought huge income to the city and was a very large employer. In addition, all the workers gathered every day in the city center, so all the bars and restaurants in the area were full, and the bars and restaurants themselves were twice as many as now. Such activity continued until the early 2000s, after which it began to decline.

There is still a large flow of information passing through the exchange, but the work of the trader has changed a lot since then, so now we have algorithms for electronic trading. In my time, the market was driven by large traders in the "pit", owning valuable classified information. Today, the market is driven by those involved in electronic commerce.

Roller coaster

Name : Chris Graceff
Company : WH Trading
Age : 30 years
“Role” in the pit : trader
Product name in the “pit” : futures bond options

“I remember how at first I was struck by the scale, swiftness and directness of what was happening. It immediately catches the eye. ”- Chris Graceff

Chris Graceffa moved to Chicago after graduating from Wesleyan University in Middletown, Connecticut with a bachelor's degree in economics and settled in WH Trading, one of the many high-frequency trading firms. After working as a messenger and clerk on the exchange, he became a trader sitting opposite the computer. After working for several years, Chris returned to the “hole” for trading options on 10-year treasury bonds, but already as a trader.

I have an analytical mindset. I was very active, and they told me that I have everything that is needed for success in this area, as if I was born for this.

I remember how at first I was struck by the scale, swiftness and directness of what was happening. It immediately catches the eye. Everything is so real and easy to feel. I also remember how delighted I was. Here I would not have to sit at the table 12 hours a day and follow the changes in the table, which, for sure, I would have to do otherwise.

It's like a roller coaster: some days will be successful, some will not. You need to be prepared for this. When everything works out for me, I really enjoy what I do. Every day I can wake up and go to work in anticipation of a new day, new opportunities, new difficulties that I will have to face. Here, all days are different from each other, and each of them is a new test. There is no place for uniformity: even the routine work is different every day.

Eight years ago, they told me that the "hole" where they trade options on the Euro / Dollar currency pair will disappear in 3-4 years. The same thing was said to me about the “hole” for trading 10-year options. Nevertheless, I try to save a place in my "hole". I still can't really succeed in bidding because too many people want the same. All exchanges may close in a year, 10 or 20 years; maybe they will be closed in 18 months. But I am sure that I can do electronic commerce, if necessary. It seems to me that versatile specialists will always be in demand: if you are good in several areas, then you will always have the opportunity to succeed in one of them.

One way or another, people will need certain goods - whether it be loan insurance or oil options - and I will trade them at my computer. In addition, I am sure that my company, like many others, will do everything to stay in the leading position, and then I will just return to electronic bidding.

Thunderstorm Hurricane

Name : Virginia McGhety
Company : McGathey Commodities (President)
Age: 56 years
“Role” in the pit : broker
Product name in the “pit” : futures options on wheat

“Many people called me too indecent words, so sometimes I had to answer them the same way,” - Virginia McGhety

Virginia McGhetti gained experience trading options on the Chicago Options Exchange. In 1983, she moved to the Chicago Board of Trade, where she worked in the "pit" for trading corn options, and after that, she traded wheat options. In 1987, she founded McGathey Commodities.

I went through severe trials and unbearable suffering. It’s even hard to believe that I succeeded. It’s very hard for me to talk about some situations. It was so complicated that if you are too sensitive or have not developed enough confidence in yourself, I would advise you to stay away from all this.

As soon as I decided that I would become a broker, I tried to understand the essence of the business in practice. Some directly told me: “I would never let a woman touch her orders, even if she was the only broker in this trading room.” I just did not expect to hear such words. Others have treated me worse, so you can imagine what they told me.

It seems to me that it’s hard to survive here without rudeness, so if you want others to respect you, you will have to treat them very harshly. Many called me too indecent words, so sometimes I had to answer them the same. I learned to pacify such people, so if someone wanted to compete with me, he would really regret it.

Somewhat later computers appeared that became quite powerful weapons, and they provided me invaluable assistance. At first I did not understand that their appearance would turn the whole market, or rather, it would become this market.

One of the most vivid and memorable periods in my life came after two of my nieces, two nephews, and two of my brothers started working in my company. We all worked side by side: everyone was trading or filling out papers. I am happy that I was able to bring the company to such a level and provide an opportunity for each of them, regardless of how much they earned. It was an unforgettable experience, and it seems to me that everyone will agree with me. Since then, we had something to discuss at the Thanksgiving table.

Support for beginners

Name : Larry Schulman
Company : Cheiron Trading (CEO)
Age : 59 years
“Role” in the pit : former trader
Name of goods in the “pit” : options for 5-year futures and bond futures options

“For many, it's like an interest club; are they friends of yours; it's your lifestyle. ”- Larry Shulman

In 1982, Larry Schulman was one of the first to trade 30-year Treasury options at the Chicago Board of Trade. Since then, he has trained many traders in the art of trading in the "pit" and conducting online trading. Today, his company, Cheiron Trading, employs 15 people, and they exclusively conduct electronic trading on interest rates and contracts for the supply of goods. Larry still remembers his first deal on the exchange.

I needed to make this deal, but I could not utter a word. I was so nervous. I was just paralyzed. I tried to give a signal to the broker to buy 14 futures and immediately agree on the phone with the client. Fortunately, they both guessed what I wanted from them, but it was just awful. However, for me this was a good lesson, because over time I brought several hundred people into this business. Having experienced everything in my own skin, I clearly understood what it was like to be a novice in this business, how many nerves it took and how unusual this place and the work itself seemed.

I actually became an expert in this field. To succeed on the stock exchange more than 30 years ago, it was necessary first of all to quickly count in your mind, act aggressively and coordinate your voice with gestures.

For many, it's like an interest club; are they friends of yours; this is your lifestyle. You like being here. Many people prefer to have their own booth in the trading floor than their own office, since they have been working here for 30 years, and the trading floor has become their second home.
Now everything is different: the only reason I am in Chicago is that I am already in Chicago and do not want to move. Now firms appear in Texas and Montreal: there are large players involved in high-frequency trading. Now you can start your business anywhere, now this is not a problem. 20 years ago you would have had to start it in Chicago.

The ways of mastering skills have changed a lot. The methods for achieving success will no longer be as democratic as they were 30–40 years ago. Now for this you will have to work hard at an early age: you need to be able to choose the right university and study diligently.
It is unlikely that you will have several separate sources of income, because running a separate business involves additional costs. The popularity of your company is becoming increasingly important. Previously, you could remain a small entrepreneur from Chicago, where the entire business community was located. Now everything is different.

Public relations and the economic influence of the company are carried out differently: it seems to me that they have decreased. Even if your overall performance is higher, this does not mean that your influence will be stronger. If the company's revenue is $ 1 billion, then it will have less influence than a thousand individual small entrepreneurs whose income is equal to 1 million. This group of thousands of people has much more connections than such companies.

Voice of experience

Name : Lee Stern
Company : LBS (President)
Age : 88 years
“Role” in the pit : former trader
Product name in the “pit” : soybeans futures

“One way or another, stock exchanges are closing for a long time. 95% of trades are now using computers, ”- Lee Stern

Lee Stern has been trading at the Chicago Board of Trade for longer than anyone: the start of his membership on the exchange dates back to 1949. He was considered an unsurpassed trader engaged in the trading of soybeans futures, and also founded his own clearing company, which guarantees the fulfillment of obligations under transactions. In 1992, when one of his clients illegally tried to monopolize the US treasury bond market, Stern lost $ 6.5 million. (No charges were brought against him or his company). Now you will not see Stern on the trading floor: he trades in various contracts from his computer, which is located in one of the offices of the CBOT building.

After the army, I got a messenger at CBOT. At the end of World War II, I served in the US Army Air Force Corps. I have heard about CBOT since one of my friends has been a member of it for several years. I studied at Roosevelt University then. The messenger's work began in the morning at 9:15 and ended at 13:30, and classes began at 14:00 and ended at about 17:00, so I had an ideal schedule.

The first day I had very little money on the exchange. There was $ 500 in my account, so I had to act very carefully to save them, because if I lost this money, I would be thrown out into the street. I would have to sell my place on the exchange.
When I came to CBOT, most were hostile to Jews. Of course, later people of various faiths began to actively trade on the stock exchange and became its members, whether Irish Catholics or Jews.

Today the market has grown so much that modern trade can not be compared with trade, in which I participated in the 50s, 60s, 70s and 80s. They cannot be compared: the size of the modern market is simply huge.

One way or another, stock exchanges are closed for a long time. 95% of trades are now conducted using computers. The only ones affected by the closure of stock pits are probably those who are currently trading in them. This is sad because I know many of my peers — they are younger than me, but I call them peers — who find it very hard to start working on a computer. For some reason I had no problems with this.


Name : Jan Young
Company : Bear Brokerage
Age : 35 years
Role in the pit : clerk
Product name in the pit : futures options on the EUR / USD currency pair

“Feel your work trying to strangle you?” This tension is breathtaking. ”- Yang Young

Jan Young works as a clerk at Bear Brokerage and is located in the "hole" where they trade options on the Euro / Dollar currency pair, the most active "hole" on the Chicago Mercantile Exchange. He left Hampshire College in Amherst, Massachusetts, having studied for two and a half years, then returned to his hometown and got a job as a messenger in the Chicago Board of Trade. Now he is helping one broker accept orders from local traders.

Together with the guys from Bear Brokerage, we went to Vegas and New Orleans several times. At some point, they became for me a real family. When you have to deal with such trust and other people's money, it gives a foundation for the future. They have to rely on you, and, feeling their trust, you are surprised: "Wow, they trust me." They know that I will not spoil anything and will not make a mistake. I have been working in this mode for quite some time - gradually you get used to it. After some time, we became one.

I also noticed that our company is the most multinational in comparison with other companies. Some companies worked only white. Our company included Jews, Catholics, African Americans, natives of Belize, Asians, Mexicans. We were all so different and everyone worked together. We had this principle: if you do the job, we hire you.

A certain emotion is felt in the “pit” when others shout something, and your colleagues try to shout them out. This is an indescribable feeling. No one else experiences this at their work every day. Feel your work trying to strangle you? Such tension is breathtaking, and always has been. I think that’s why stock pits still exist: people need them.

The exchange provided many decent jobs, and people liked what they did. Moreover, the whole city knew about you like that. You could proudly say, “I work at CBOT.” You could write the history of Chicago, which is of great importance for the city, including from a financial point of view. I don't want this to disappear.

As far as we know, in option “pits” the level of trade is still high, so we try to stay in this area until everything is over. It was a completely extraordinary, crazy journey.

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