Streetwise Professor

November 8, 2007

I Wish I’d Said That

Filed under: Derivatives,Exchanges — The Professor @ 11:47 am

From a New York Times article on the fading away of floor trading in Chicago:

Equal access to the markets has made trading more challenging for pit traders. “We’re trading against machines” all over the world, said Jeffrey Levant, 53, who has been at the exchange for 29 years, and recently left the Nasdaq pit to learn electronic trading. “Sometimes it feels like we’re John Henry going up against the steam hammer.”

Well said. In the past I’ve compared floor traders to the Polish cavalry charging German tanks in 1939, but Mr. Levant’s metaphor is much more colorful and evocative. It is particularly evocative when one listens to “John Henry” by acoustic blues performer Furry Lewis: “I’m gonna die with this hammer in my hand.”

It is somewhat ironic to see how things have changed in a short decade. Even in late-1997 it was widely believed that the floor was inherently superior to the machine. Then, in early-1998, Eurex wrested the Bund contract from LIFFE, and the momentum changed. I had been an early advocate of electronic trading, and had taken some flack for that advocacy. Hence, it was somewhat gratifying to see my predictions borne out. Nonetheless, even an apostle of the steam hammer can feel for John Henry, and it is with mixed emotions as I see the floor and its vibrant culture fade away.

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