oops

How much longer until the remaining floor traders are driven to extinction?

i just realized this was prob a bad idea, I can't post this stuff

Just post it.

Don't name the company and specific order sizes.

blue balls man

Options guys are pretty much the only ones left. This is because options customers often want unique spreads that aren't easily available in computerized versions. Electronic option spread bids and offers are simply the computer legging it for you and in this manor the prices will be far worse than someone making an acrtual market in the desired spread. The pits will get some unique 3, 4 or even 5 legged custom spreads that would be a nightmare in execution without a person actually pricing the spread for them. The futures pits are ghost towns now.

Just saw an interesting documentary, floored, about traders on the merc and how so much volume is going off the floor:

http://flooredthemovie.com/community/

That is a great movie, I'm in it a few times. It is sad, but those are definitely true stories. The problem with getting rid of the trading floor, is once all markets are electronic it will be hard to get honest fills on big option spreads. Traders will most likely have to trade them one leg at a time.

My time left is definitely limited, ****ing computers, but I've been hearing that the floor has five years left since the early nineties. In all honesty, I think I'll have a job on the floor, for at least the next 5-8 years, the last few years may be pretty bad though.

Sorry to dissapoint by erasing the story, but if anyone wants, I'll answer any questions you have about live trading at the CME.

I always wondered what "floor trader tricks" that used to be used were that dont work now that markets are mostly electronic.

You can't buy it at 6 when it's 6 1/2 bid across the pit on the screen(fast markets). In the pit when paper wants to sell size locals will pick off all the bids they can as the broker tries to fill his order...doesn't work on the screen.

The biggest difference is on the floor you know (knew?) what was there. You knew where the big paper was and you could lean on it. You could also feel the market moving through the noise and action of the floor environment. You can't lean on diddly squat on the screen. You could see and feel the market turning and puke or hang on as neccessary. The screen is way faster and more volatile in a narrow range. This applies enormous heat to the big market makers. They would do 100's of contracts looking for a tick or two. Now with that kind of size on the screen it can get extremely painful extremely quickly because market will jump or dip 5-10 ticks in a blink even if it doesn't go anywhere and the big market makers get squeezed out.

Sounds similar to the difference between table poker and online poker.

I would say some of the "tricks" are not exactly legal. One for example was the relationship the best traders have with the brokers. The brokers represent customers from around the world, who are willing to give up an edge. A broker may get an order to sell 100 sp futures. The whole pit has the same market of 1155.5-1155.8, now this broker has a market order, so he will pick five guys, out of 100 and sell each twenty at their price of 1155.5. The lucky ones who get on the order with brokers, have on a winning position instatnly. It doesn't always stay a winner for more than a second, but the moment the trade is made, they have almost no risk because all hundred guys around them are still 1155.5 bid. These five traders did not just end up on the brokers order, they have established some sort of relationship with the broker. Sometimes they intimidate the broker, sometimes they make the broker laugh all day and are friends, one way or another, as a local floor trader, you have to be respected by the brokers, or risk never trading with them.

On the screen, there are no brokers, so the system is actually more fair, but many of these live traders just lost their edge. It is like the live player who picks up reads and talks and jokes with the fish, but online cannot. The brokers are the fish, and the traders are the regulars(locals). On the screen it takes a different typed of person to accomadate the fish.

Another "trick" that is definitely not legal, is they would watch the orders being arbed in off the biggest desks and know what was about to happen two seconds before it happened.

Another trick is knowing what "stop" orders a broker has in his deck. These are orders that will become market orders at certain future levels, so again, they know what the broker is going to do before he does it, and can trade accordingly.

Many brokers have little "tells" that they are unaware of, good local traders can read the brokers voice and other tells and get an idea of how many shares the broker has to sell and lowest price his order allows him to sell it at. There is a guy in my pit, that as soon as I hear him yell in a certain voice, I know he has a good order, usually a few hundred lot market order.

The shenanigans last Thursday might have bought you a few more years with the impending rule / legal changes.

I saw Floored early this year when it was in Chicago. I thought the movie was a let down. I had huge expectations and I thought they could have covered more material. Granted it was a small independent production...

I ran into the director a month ago at the Weiners Circle. Small world.

Kinda bummed I wasn't a floor trader in the early 2000s. From the stories I've been told you could have been the biggest idiot and still made a killing because markets were so wide.

Edit: Do you know the back story behind that Riba character? A few of our partners knew him but wouldn't give any details.

Last thursday, the markets in the option pit and on the e-mini's were SOOOO wide. A quote would literally be 1.00-15.00, and I would still get market orders, buy 100, broker doesn't want to mess around and miss the offer, so we were just lifting offers and hitting bids. The locals cleaned up.

Two years ago, thats when all the AIG/Bear Stearns stuff was right?, the markets were just as wide, and for a few weeks straight. Small local option traders were making millions upon millions. Most of them aren't trading their own money, but were still were getting bonuses in the millions. I just found out this dummy in my pit made 2 mil two years ago. Last year was bad for most of them though, much less paper trading and markets had to be tightened up again. The guys who do trade their own money, are all a different kind of rich now. That is just in the sp options, but I'm sure the story is the same in other pits.

Was Riba the guy in the movie who was drinking wine and slurring? No I don't really know any of the guys the story is about.

Yeah, last Thursday was an aberration obviously. I was mainly talking about prior to 2005 where everything was quoted in nickels and dimes or better.

Yeah he was the guy slurring and what not. Maybe I got the name wrong, but that was him. I'm sure he blew out at some point in a epic fashion but not before locking in tons of profit.

What pits are left in the merc nowadays?

The sp option pit, the euro option pit both still do tons of business pretty steadily. The sp future pit still does a lot of business, but most if it is during the rollover. I'm not sure about the bonds, but I think the only times they do any volume is during rollover. From what I hear, the corn and corn option still do good volume.

The sp options are doing as much, or more, business than EVER. Sure there are way fewer customers, but the ones that trade, are trading bigger than ever. In the late nineties/early 2000's, a thousand lot was a huger order, and we only had a few customers trading that big, and they only traded a couple of times a month. Now we have a few customers who buy or sell 5-10,000 one day and trade out of them, or roll them over the next week or even next day.

The best thng for option volume in the sp was creating the weekly and monthly expirations. Now most of the big traders have on positions, in the weekly, end of month, and spot expirations. Also next day expiring options trade a few thousand everyday, always puts about 100 dollars out of the money and always for .10. There is a rumor that one of the main customers who sells them, got a margin call last week, and cut his losses at 22mil and is no longer a customer.

What are the seat fees on the merc going for these days?

CME @625K
IMM @430K
Iom @165K
GEM @37k

I go on a IOM badge next week, assuming I pass the test, and will be filling in the options pit. This is one of the reasons that I deleted my original post. I've been clerking for my group for seven years, and didn't want some dumb story to stop me from being a broker.

Errr, I meant how much does it cost to get on the floor for a month. I guess maybe desk fee is more appropriate. Blanking on the specific name.

Congratulations.

Greg Riba

I like how they lead into the interview with him talking about drugs and alcohol with a few other guys. The guy seemed like a mess, would be interesting to hear the story behind him.

It would depend on what you wanted to do for that month you were on the floor. The prices I listed are to own your own seat. Different trading pits require different badges to trade.

You can also lease a seat on a month to month basis, http://www.cmegroup.com/company/memb...#pricingType=1
I can't lease a seat because if you are leasing, you have to wait one year, before you can fill orders as a broker.

You can rent a desk on the floor for cheap, but you can't trade from the desk without a membership.

I know a woman who worked with Riba, and knew him well. I will get some dirt on him for tomorrow.