CHICAGO (Reuters) - For many Chicago commodity traders like Redmond Harkins, little will change when the city’s fabled futures pits shut down after more than 165 years of open-outcry dealing.
The 27-year veteran dealer will continue taking the hour-long train trip to the storied Art Deco Chicago Board of Trade building on West Jackson Boulevard, where most futures dealers long ago abandoned the art of trading soybeans or hog futures through flailing hand signals and guttural shouts.
On a recent Wednesday in mid-June, standing at the edge of an empty rice trading pit, Harkins showed off the tools he has been using for years: a handheld tablet computer and a mobile phone. After the futures pits cease to function next week and options trading migrates to the CME Group Inc's CME.O adjacent financial room in September, he plans to simply claim some standing room near the new wheat options pit and continue trading.
“The writing’s been on the wall for a while. When they close this room down, I just need a place to stand and everything else I need is right here,” said Harkins, gesturing at his equipment.
Plucking from one of his jacket’s half-dozen pockets a stack of trading cards - used in bygone days to record trades quickly in hectic pits - he added: “I wouldn’t even know to use these things any more.”
CME Group is planning to shut down most open-outcry futures trading on July 6 due to dwindling volumes, and migrate trading to electronic screens. In 2004, nearly 28 percent of all futures trading was conducted on the floor; last year that share had shrunk to around 1 percent.
The imminent closure of the pits is likely to be the final straw for some traders, prompting them to hang up their multicolored trading jackets for the last time. Many others, however, will maintain a presence on the trading floor even though they can execute orders electronically from just about anywhere in the world.
FROM PITS TO CUBES
Many of the booths where brokers once took orders by phone are being converted to self-contained trading stations grouped by commodity, making the cavernous trading floor feel more like a warren of office cubicles than a frenzied financial operation.
In the past, savvy floor veterans would gauge the body language of rival traders or respond to sudden activity from major traders to gain an edge. Now, those remaining on the trading floor hope to draw similar cues from the options pits, which will remain open. Location matters.
“When there is something going on in the market you want to talk to someone, you want to sort things out. When you’re sitting in front of a screen and you’re not down here, it’s a different feel,” said Tom Cawthorne, a hog futures trader with AgFutures Managed Investments, speaking from the sidelines of the hog pit.
Fourth-generation grain trader David Hollander, who has been executing his clients’ trades electronically almost exclusively for years, will be relocating from a pit-side desk in the CBOT grain trading room to one near the relocated soybean options pit.
“I plan on being on the floor, at least for the open every day, to talk to some people and get an idea of what’s going on in the market,” he said.
CME Group has finalized all booth allocations and said and the “vast majority” of trading firm applicants received their first choice of booth location. All others were allocated spots in the “general proximity” of the options pits.
Soybean futures trader Thomas Cashman will continue dealing electronically from a booth high above the floor among a cluster of booths reserved for electronic trading, a stark contrast to his current floor-level, pit-side desk.
Quitting the trade was not an option for the 76-year-old CBOT member, who recently celebrated his 50th wedding anniversary. Rather than hang up his coat or trade from home, he will continue to make the 12-minute commute to 141 West Jackson Boulevard - “for the sake of the marriage,” he joked.
Additional reporting by Theopolis Waters in Chicago; Editing by Jonathan Leff and Matthew Lewis
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