Pit Traders from Chicago & New York Find New Homes: Commodity Futures Markets

by | Jul 7, 2015 | Agricultural Commodity Futures, Alternative Investment, Commodity Futures Trading, Global Markets, Hard-Asset Investments

Commodity futures traders that once worked the world renowned trading “pits” in the CME Group exchanges have had the doors shut on them, but they’re not quite ready to throw in the towel. Instead, some Chicago & New York based futures traders appear to be setting up shop right next door to the active commodity futures options pits by renting booths as office space.

The decision to remove the pit-traders from the Chicago Mercantile and New York Mercantile Exchanges was actually made in February because open outcry trading reportedly only accounted for a mere 1% of futures volume – to keep the doors open and the lights on apparently isn’t worth the owners efforts. This open outcry system dates back to the 19th century, but over the past 15 (or so) years off-floor trading has been taking over the volume with the rise of computers being used for trading- and leveling the playing field for most in the meantime.

Jeff Evans, Vice-President of the Managed Accounts Division for RMB Group in Chicago, shares his view regarding the fundamental assessment of the commodity futures markets by stating, “As the commodity futures (pit) traders on the floor thinned out over the last decade, the ‘playing field’ for most other (off-floor) traders has been leveled out.” Evans added, “Futures trading volume has been dominated by those off the floor for quite a few years now.”

At one time at the height of commodity futures trading, it was standing room only in the trading pits as floor traders and brokers yelled and screamed for business. The last time I visited Chicago, I saw much fewer brokers and traders with some even killing time by reading magazines right there on the floor. The computer-age now dominates, and this is something I have been looking for for many years in anticipation of the “level playing field.”

ALL COMMENTARY IS CONSIDERED OPINION & VIEWS FROM THE AUTHOR AND NOT A SOLICITATION OF ANY SECURITIES. THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.