I was a fan of romanticism when I was a young man, eagerly studying Romantic poetry.
Not the lovey-dovey stuff but the “emotion recollected in tranquility” stuff.
Then I graduated, grew up and put aside romanticism, now considering it a dangerous form of dishonesty.
That’s why I’m not grieving too greatly the impending demise of Chicago’s storied futures trading pits, and I suggest you don’t grieve too deeply either.
CME Group announced Feb. 4 that all trading pits except for S&P 500 futures will close by July 2, 2015.
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It’s a poignant historical moment, being the end of more than 140 years of open outcry trading for agriculture, but for farmers not much will be lost.
Almost every agricultural future contract is already traded electronically, and most traders have made the all-electronic leap.
Farmers shouldn’t find it harder to place a hedge, and if anything, trading could become cheaper.
Still, it is the end of an epoch in agricultural markets history, and while not grieving, we can feel a tinge of melancholy. The first futures contracts ever were agricultural contracts, and some of the last ones hanging onto open outcry are the agriculturals, with traders having some justification to claim that there’s something different about crops and meats.
I took a journalistic tour through some of this continent’s agricultural futures exchanges during the 2000s, visiting the New York Board of Trade’s “softs” pits, the Kansas City Board of Trade’s hard red winter wheat pit and the Minneapolis Grain Exchange’s hard red spring wheat pit. This was spurred not just by my interest in futures markets, but also because I knew from living in Winnipeg that open outcry was likely dying and I wanted to see it before it passed.
The Winnipeg Commodity Exchange’s agricultural futures markets had been the first in North America to leap into all-electronic trading in 2004, acting aggressively to get ahead of the curve on a development that was already well underway in Europe and elsewhere, and little in coming years suggested they’d gotten that call wrong.
The exchange didn’t die or become irrelevant, and as I toured the other exchanges, I never found anyone who would confidently predict that electronic trading wouldn’t eventually triumph everywhere.
There have been and will be victims of the revolution. Many floor traders have skills that were ideal for the face-to-face, in-your-face, chest-to-chest exuberance of the pits, but not so good for behind-the-screen trading.
Independent traders — “locals” — don’t have any sort of edge in electronic trading. Most of them are gone.
It’s a shame for reporters like me because it has been pretty cool to be able to call traders on the floor, with all the noise and mayhem in the background.
It was cool to be on the floor of places like KCBT, a raucous place back in the old days of the mid-2000s, and see the world price of HRWW literally being made by red-faced, sweaty men in colorful pit attire.
But you can still see traders chewing through the stream of data, rumour and mood in real time. Many do this now on Twitter, which is uniquely well-designed for traders. They chat back and forth with each other, publicly, about what’s going on in the markets, and you can lurk along and see what they’re saying right now.
For a taste of this, check out @AustinDamiani or @LorneBoundy.
I remember asking a few Winnipeg traders in 2004 if they were keeping their trading vests as keepsakes of their floor days. A couple said they were. More said they weren’t. After all, after years of being worn, they were tattered, sweat-stained, pretty gross and inspired little nostalgia.
Maybe that’s how we should feel about Chicago’s historic agricultural pits disappearing: it’s sad, but there’s not much left to hang onto.
