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front of the futures exchange is primarily due to the fact that there are other screen-based markets now on U.S. soil. In December 1996 you couldn't say that; that is, the Eurex project has been here less than two years. |
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This is a viable example in which U.S. practitioners can compare their Chicago style of trading, formerly only open outcry. For the broker or FCM, it means calling down to the floor, arbing into the crowd, getting a ticket, arbing back to the phone clerk, getting a ticket written up, submitting it to the clearing firm, and then giving the fill on the phone. So there was something to compare to, as opposed to Globex, which has been around for six years but wasn't working well due to its technology. It was a closed system. Now, Chicago traders and brokers have seen a working example and said, "Hey, I like this way of trading. It is very efficient and it reduces the paper flow." The time it takes to get fills and the propensity for errors are also reduced. |
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Neal: Many pit traders are scared. Seat prices are dropping. Many are thinking of going back to school to learn a new trade. Can they adapt to the new technology? |
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Tony: That's a topic for an entire chapter, but it's definitely an apropos point. However, that fact doesn't change anything I said earlier about the way Chicago style trading is moving. The point that you raise, Neal, brings to the table the question of whether the same people will be the engines driving the deep liquid markets that we have in Chicago trading today. That question is unanswered today because the exchanges (for the most part, the two futures exchanges in town), haven't addressed it. They've been blindsided by it completely. They've missed the boat, so to speak, to keep their liquidity engine readied for the future. Their engine is the capital and trading acumen of the men and women who stand in the pits on the floors of these Chicago markets every day. The leadership is detached from that engine, in that it assumes that it can fend for itself in respect to the future role of exchanges and the way they will be doing business. |
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