Tuesday, January 19, 2010

bloomberg: Trading-Pit Envy Strikes Chicago’s New Electronic Generation

business WEEk

Jan. 19 (Bloomberg) -- A case of trading-pit envy is rumbling in Chicago.

“Floored,” a documentary that shows the fading of the city’s rough and rowdy open-outcry culture, is driving some of Chicago’s top electronic traders to defend the drama of their mouse-click world. The film is in the middle of a one-week run at the Gene Siskel Film Center.

Been there  done both and most of the time the eledtronic is better ( for the publi), but if there is crisis or panic the pit is better. A group  of guys in a given pit make prices in that commodity. That is who they are and in a crazy market they still do it. Screen traders just change to a more manageable symbol or different commodity leaving a market vacant or very thin. A mixture of both is the best solution.


Bill C said...

I don't think the pit handled fast markets better than a screen. Do you remember when they used to throw up the F next to the price during a "fast" market? That meant that it was time to F*** the customers. :)

BBL Jr said...

Bill C., thanks for the comment. I understand what you are saying because it has happened to me but I do not agree. The thing that causes fast markets is very one side order flow busually because of some news or big sentiment change. In an electronic market the bids and/or offers can literally disappear entirely. In the pit the market will get wide and thin, and no one is out to do any favors, but a pit trader trades only that market and if asked to make a price their pride usually makes them give one. That may not be a good price but they will give one. If a market is selling off in a panickly fast market and you send a sell order you are just joining the overflow and until those orders find buyers that market is going down and your fill will be ugly. Send a buy order in that situation and you will get a pretty good fill. Mostly the bad fill problem is before electronics one could never really know when the order actually hit the pit. i am not claiming you never got screwed but I will say, as someone who traded for years off the floor then went in to the pits for 20 years, that very very few customers got screwed because of the internal competition in the pit itself. For example, if broker takes your order and sells it to pit trader A at a price of 5 when pit trader B is bidding 7, pit trader B is going to go ballistic and cause a ruckus.
Thanks again for commenting. The main point I wanted to make in my post was that we want a group of people dedicated to making prices in a market and electronic trade doesn't give us that. In other respects electronic is superior.