25 things vanishing in America, part 2: Trading pits
One of my favorite scenes from the movie Ferris Bueler's Day Off is when his friend Cameron is imitating the Three Stooges-like hand gestures of the traders on the floor of the Chicago Board of Trade. These types of trading pits are still around, surprisingly, given that financial experts were predicting their demise since the late eighties. Now there's a new system in place, hybrid trading, that lets computers do most of the heavy lifting, putting traditional trading pits on the endangered list.
In 2006, floor traders handled 86% of shares traded in a single day. A year later, that number plummeted to 20%. The elimination of human errors, especially those that rack up expensive fines, and increased speed and efficiency are reasons why technology looks so much better compared to the sweltering, yelling, frantic hand gesturing of the trading pits. A "trading floor" is any type of venue where trading takes place. But now they're full of desks with computers and involve a lot of mouse-clicking. Traditional trading pits are slowly being phased out, putting an end to the infamous physicality of trading.
I was on the floor of the Mercantile Stock Exchange in 2006, when things were starting to look especially sparse and floor traders and the clerks who assisted them were losing their jobs. Once trading got started, though, it still looked like complete mayhem, like a bunch of heavyset mimes pretending to drown: waving their arms frantically and puffing out their cheeks. Or sometimes it looked like gangs challenging each other to cross to opposing sides of the street.
Cari Lynn, the author of Legging the Spread, a book that looks at the gender dynamic of trading pits, told the BBC in a 2004 interview, "The pits were violent, I saw fistfights breaking out, it was shoulder-to-shoulder, people getting elbowed and I couldn't see any women."
Oh, honey. My very good friend, Lauren Carbone, moved to New York after finishing her masters in fine art. She's a petite thing who made it onto the cheerleading squad for the San Francisco 49ers, but left to pursue her masters. Her first night in New York she met a couple of traders who, what else, were bragging about their jobs, except they were only gloating about their work schedule--off by 4 pm. Lauren landed a job in their firm--anything to pay the bills and have time to make art--but the stressful, testosterone-drenched work environment eventually caused her hair to fall out, in clumps.
"At first you think it's a little exciting, you don't mind the remarks every now and then. The [women] who have been around for a while are super tough...[The male traders] don't respect you, they're not looking out for you. If you want to prove that you're a trader, you have to give it right back and know yourself, and detach from your sex."
CNBC's Mario Bartiromo launched her career reporting from the floor of the New York Stock Exchange, where she received the nicknames "Money Honey" and "Econo Babe." At least she grew up in Brooklyn and was tough enough to deal with the pushing-and-shoving environment.
"It's very cliquey and people watch out for each other. [Except] the men don't go out of their way to help the ladies out," explains Lauren.
She described how the traders would write down their orders on a tab of paper, rip off their order and throw it into the center of the pit where two people wearing protective goggles would grab the pieces of paper and stuff them down a special shoot where they would go to be processed into a computer. Whew! What a process. A computer is an attractive option, one that can't call you honey, unless you install an application for that.
Eventually, Lauren says, "The floor got really quiet, really quiet. There were always people moving out and figuring how to trade more effectively electronically."
Even though trading is no longer the rugby of finance it once was, the markets are still a violent place. Lest we forget.