Streetwise Professor

July 30, 2012

A la recherche du temps perdu, Trading Pit Edition

Filed under: Uncategorized — The Professor @ 1:38 pm

The impending closure of the ICE floor made me somewhat nostalgic-despite the fact I have long predicted that the floors were doomed, and I recognize that their demise is an example of creative destruction.  I like history, and get somewhat wistful when tangible connections to the past pass on.  In that frame of mind, I have been thinking of the many colorful accounts I have read of events on the floors in Chicago and New York.  In the late-19th and early-20th centuries, dramatic events on trading floors were covered by major papers in the news section.  Commodities were much more important then (in large part because a much larger fraction of the population and the economy was agrarian), and big moves in commodity prices-often the result of dramatic manipulation attempts-were front page news.

A case in point, from cotton (which I chose deliberately due to the ICE connection), is this article from the New York Times on May 19, 1903: “VIOLENT ADVANCE IN COTTON MARKET – New Bull Leader, Col. W.P. Brown, Here from New Orleans. May Option Reaches 11.68, July 11.26, and August 10.93.” (Confusingly, during this era-and even more recently, though less so-it was common to refer to “futures” as “options.”)  Scenes like this will not be seen again:

Before the hour of the opening arrived the pit was filled with a crowd of brokers seven rows deep.  Col. Brown [who was running a corner] was there also, and everybody kept a watchful eye on him . . . .

From that moment on until the gong sounded the close for the day the pit was one surging, seething mass of men, all of them excited and many of them evidently on the anxious seat.  They were all closely watching the man from New Orleans, who was supposed to be in the main responsible for the activity of the market.

A “surging, seething mass of men, all of them excited,” is already pretty much a thing of the past, as even the remaining pits are shadows of their former selves.

Google news archives can turn up some interesting articles in a similar vein.  So can some time spent looking at old editions of Chicago papers available in some databases, which covered the markets closely.  For a fictional treatment, Frank Norris’s The Pit (based fairly closely on the Leiter wheat corner) is excellent.

Though some things are changing, other things are enduring.  Like corners. Including, quite probably, in cotton.

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  1. Wait until Obama finds out about this. Destroying jobs is destroying America. I can’t’t wait to see him standing on the exchange floor yelling to “get those traders back here! Turn those machines back on!” (H/t to Mortimer Duke.)

    In all seriousness, just another example, much like how technology has largely replaced the bank teller, how jobs are lost yet productivity increases.

    As for the guys who were on the floor, its interesting to see what they did after they left the floor. One I know tried to start a restaurant, another is running a self storage facility in Palm Springs, yet another went into the business of wholesale food sales. Few stayed in the financial industry.

    Comment by Charles — July 30, 2012 @ 3:22 pm

  2. Definitely, Charles. He’s already gone off on ATMs and online airline reservations. Going after electronic trading is a twofer-a hit on “Wall Street” and job killing technology. In three, two . . .

    The ProfessorComment by The Professor — July 30, 2012 @ 8:06 pm

  3. Check out this video of a 1911 short film by the master DW Griffith called “A Corner in Wheat”

    Comment by Scott Irwin — August 8, 2012 @ 9:00 am

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