Anyone here ever work as a pit trader? I'm curious to know how the pecking order (queue) was established. Who got in and out first on a big move? Was there any form of fair and equitable system for order processing; say, a deli ticket system? Was it size of orders? Friendships? Expensive lunches, box seat tickets, etc.? All of the above? When using hand signals to transmit orders, would the person taking the signals ever put someone on hold to take another order? Is there a good read on pit trading that someone could recommend?
It was all about relationships.. lots of testosterone.. some guys had 250k weeks, thousands of lots turned over. A floor broker fed you the order flow immediately give up the spread to you. The 'edge' from the pit is at the core of all price action. The microstructure bid-ask spread. Instability fractals out to all timeframes. NFP days were the most exciting, .. huge swings within minutes, if you had the bank, thousand lots full point swings within seconds the waves crystallized and trend emerged that would continue rest of the day. 1 tick on a thousand lot, 31k in bonds. 1 point, a mil. Can't look at the money as money, just numbers. Otherwise you will freeze up.
Bulls and Bears (late 90's) is good too... about the Australian futures trading. I never was in the pit, but from what I got from colleagues (options), whoever has the biggest mouth and elbows got in first. Order processing was in the form of paper tickets. Green/Red/Blue/Black for Put-Sell/Put-Buy/Call-Buy/Call-Sell.... Floorbroker keeps track who he trades with (through recognizing the jacket) and tickets get swapped. Mistakes where made a lot... not sure how they dealt with that. They had officials to check on fair trading as well. You would get a fine if you didn't wear a tie . The traders all made money on side bets when it was quiet. I even heard of stories where a few trades bet against some officials in a big way... officials lost (duh...) and they were in it for something like 200k... the exchange bailed them out... hahaaa I would've loved to be in the pits, especially in the early days with spreads the size of Kardashians buts!
Each trading floor was different. I was on the AMEX. After the first trade, anyone could be on parity with everyone else bidding or offering. Everyone was entitled to a match. The specialist got the biggest match unless there was a customer order. On the futures pits, you could trade with whomever you wanted at that price and cut everyone else out. It was the true buddy buddy system. I think the CBOE was the same way. I was a wire clerk/floor broker before trader. You took one order at a time and sometimes the customer waited on the phone while we checked the market and hand signaled the order and got a response. There was typically more than one clerk in the booth, but if all the lights were lit, someone had to wait. Most of the time we would take a few orders, use the vacuum tube system to send orders to the floor for the broker to take out, they were way from the market, and used hand signals for the executable ones. I still remember the hand signals.
Brokers execute trades for customers, trader traded for their own/firm account. On some floors, they could do both and take the other side of the customer order.
Why are you asking this pit trading question, are you interested in becoming one... Did you just watch the movie Trading Places, and feel this is how all the serious, big money is made on Wall St