Tales from the Pit
The futures trading pits of Chicago and New York were unique places where prices were discovered in countless global commodities, currencies and financial instruments. The floor created efficiencies that truly improved the world. That may sound like hyperbole but it is not. Futures markets have changed all aspects of American life for more than a century and a half and until recently, trading was done in these dynamic trading pits. That technology has perhaps made them nearly obsolete does not lessen their significance in the world of finance.
But they were also more than that. They were complex psychological environments where men, and eventually women, could test their mettle in the fiercest of competitive rings. There are few environments where the Darwinian principle played out in such a raw reality.
With the announcement that CME Group would be closing its futures trading pits, we have sought out anecdotes from long-time traders regarding some of their most memorable experiences on the trading floor.
Some are of historical importance, like the Russian grain embargo, the FBI sting operation or when rogue traders brought down a legendary clearing firm. But there are also small revealing stories of hubris and the perpetual battle between fear and greed, which is the essence of trading and was felt every day in a visceral way in the trading pits.
These are stories of our industry and although the pits are going away, as with so many other institutions with the march of progress, their lessons live on. It is helpful and educational for us to remind ourselves of them.
While many recollections come from extraordinary events, slow markets produced just as many amusing stories. While we try and avoid comparing trading to gambling, folks on the floor liked action, and if the markets didn’t provide it some strange contingency bets would fill the need. Can a trader drink a gallon of milk in an hour? One member claimed he could eat 10 Big Macs. Action was pouring in from all over the country.
One trader who moonlighted as a stand-up comic would pull the same joke every month. How did I find out? A customer from New York called me up and told me to watch for it in the 10-year pit. The trader stood on the corner of the pit and yelled with outstrentched hands, “100 bid that I will get laid this weekend.” Everyone took his action and we all had a good laugh.
Here, we only scratch the surface; it would take longer and include hundreds of anecdotes, but perhaps it will spark memories for those who read it. As we put this together I am reminded of stories of unemployment reports—a day to be dreaded. As Joyce Selander writes about a bad day a friend of hers had, I can recall that feeling in the pit of my stomach before the unemployment report came out. I wasn’t even a trader, but the feeling that traders and clerks had before that number is indescribable. You knew what was at stake and you knew what could happen. It was uncontrollable and scary.
Whenever people are put together in adverse conditions, unusual things can happen. Sportscasters like to say “adversity doesn’t build character, it reveals it.”
If that is true for a golfer with a four foot putt to win a tournament, or a basketball player shooting a free throw to win a game, it is doubly so for the people who worked on the trading floor. After all, there was a lot more at stake. A broker or local could go bankrupt in certain market conditions. A clerk could lose his job for one bad error at the wrong time.
I recall how many would-be traders got wiped out in the night bond session with the launch of the first Gulf war. Night bonds, similar to the Mid-America Exchange, was a place where clerks leasing less expensive memberships could learn the ropes of trading in a little less stressful and less risky environment. But on the evening of Jan. 16, 1991, U.S. forces launched operation Desert Storm at 6:38 p.m. Eastern time to remove Iraqi forces from Kuwait. It occurred during the night bond session. Undermanned clerks and inexperienced traders were taken by surprise by the huge influx of business. They did not have the capacity to handle the order flow and many trading careers ended that night.
Shortly after coming to Futures I profiled a friend who was a successful Eurodollar trader. His story, like so many others, is unique to the Chicago trading community. He was starting out trading in the Mid-Am Exchange.