Streetwise Professor

January 20, 2010

Old Traders Just Fade Away

Filed under: Commodities,Derivatives,Economics,Energy — The Professor @ 10:30 pm

I was in NY today, giving a press conference at NYMEX about my WTI study.  After that, I went down to the floor for a (taped) interview about the study with CNBC.

Wow.  How the world has changed.  I haven’t been on an exchange floor in a while; increased security post-9/11 has made it much more difficult.  But I spent a good deal of time on the floors in Chicago in the 80s, and in the 90s.  I was at the CBT the day the new trading floor was opened for a dry run: I remember watching hundreds of traders lining up at the entrance, like marathoners before a race, then sprinting to stake out a place in the new bond and note pits.   There was an indescribable energy on the floor.  It escapes my powers of description, really.  It’s something you had to experience.

And the operative thing there is the tense of “to have.”  You HAD to experience it, because you really can’t experience it anymore.  And that’s what I experienced first hand at NYMEX today.  I was taping right next to the crude oil pit.  Back in the day, there is no way you could have stood there, and conducted an interview to be played on TV: the noise would have made it impossible.  No problem today.  The few handfuls of traders in the pit were all reading newspapers.  I was there probably 15-20 minutes, and didn’t see one trade.  Not one.

Yeah, there was some action in the options pit, but the futures pits were essentially D-E-A-D dead.

Above the pits were many Trading Technology* screens, which were reporting the action from the electronic trading.  That’s where all the action was.  If there was a visual symbol of the dominance of electronic trading, that would be it.  The blinking blue and red screens, lording over the pit, almost mocking it with their continuous movement symbolizing a live, moving (but disembodied) market while the pit itself was almost funereally still.

I have mixed emotions about this.  In the early-to-mid-90s I was pretty outspoken in my opinions that electronic trading would make the floor obsolete.  I was ridiculed, publicly and in print, by the CEO of LIFFE, for my research showing that the electronic DTB Bund futures market was as liquid as the LIFFE’s floor market; he was not alone in his views.  I resisted the temptation to return the ridicule 4 years later when EUREX (the successor to DTB) wrested the Bund business from LIFFE.  So, in some respect, the eerie silence on the NYMEX floor is a professional vindication.

But still.  There is something–was something–truly special about the floors.  They were fascinating economic and social systems–true ecosystems.  The informal norms of floor trading–the institutions–were amazingly complex.  And highly, highly entertaining.  Moreover, the floors were a connection to history; trading on the CBT in 1995 wasn’t that much different from in 1895–at least at the pointy end, where trades were actually done.  A bunch of guys (yes, almost all guys, even in 1995) yelling and gesturing at one another.  As a student of history, there is a sense of loss when such a tangible connection to the past fades away.

There’s a new movie, Floored, that depicts life on the floors in Chicago in their twilight.  I haven’t seen it, as it’s just playing at an art house in Chicago, but hope to do so if/when it comes out on DVD.  Some folks in Chicago are ticked off (no pun intended–and you know inside baseball if you even know that COULD be a pun:) that the film (if it’s at an art house, it must be a “film,” right?) focuses on the sex,drugs, greed, and rock & roll aspects of floor trading.  Yeah, it’s undeniable that that’s part of the culture, but it’s not the whole thing, or even a big part of it, so I can understand that those who love the markets would be dismayed by such a one-dimensional portrayal.  Perhaps I will be dismayed too when I watch it.  But sex sells, and there has to be a better way to understand some of the social complexity of the floor than watching Trading Places.   One would hope, however, that a serious filmmaker would team up with some serious social scientists and do a documentary that explores the anthropology/sociology/economics of the floors.  Or that the Smithsonian captures memories of traders, like it does of old blues players and such.  Before all the old traders just fade away.  Because it’s happening before our eyes.

* Full disclosure: TT is a consulting client.

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  1. […] This post was mentioned on Twitter by Diane Saucier and Lena Hanson, Patches the Cat. Patches the Cat said: Streetwise Professor » Old Traders Just Fade Away: I haven't seen it, as it's just playing at an art house in Chic… […]

    Pingback by Tweets that mention Streetwise Professor » Old Traders Just Fade Away -- — January 21, 2010 @ 5:46 pm

  2. What does the Prof think about the Volcker Rule?

    Comment by Surya — January 21, 2010 @ 11:04 pm

  3. I blogged about Floored at

    Comment by Jeff Carter — January 22, 2010 @ 11:47 am

  4. Hey, Surya–Just posted on the Volcker thing. Thanks for asking.

    The ProfessorComment by The Professor — January 22, 2010 @ 4:25 pm

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