gnome The pit contract is 5 times the size of the ES. Institutions will use which one for price discovery? Let this sink in deep fellas..................the pit sets the price that ES follows. Later, time to slice some bacon. Computers have NOT changed trading on short time frames for small traders. Speed has improved, order entry and exit is sweet now but all else is the same unless you are a fat cat. Gee, how many fat cats roam ET? ..
An interesting read. Stranded by Street, ex-traders seek rebirth Electronic markets erode a way of life; some expats struggle to relaunch careers Crain's New York Business By: Aaron Elstein Published: February 18, 2007 - 12:57 pm Linda McBurney worked at the New York Stock Exchange for more than a decade, jostling with hundreds of other traders barking "buy" and "sell" orders. Not anymore. Over the past couple of years, as firms increasingly used computers to make trades, Ms. McBurney realized that her career prospects were bleak. Last July, she left to find a new job. She's still looking. "I'm at a point in my life where I'm trying to reassess why I was put on this planet," she says. She's got plenty of company. The explosion of electronic trading, which is changing the way New York's stock and commodity exchanges operate, is also eliminating hundreds of jobs. The transformation is slowly but surely cutting off the livelihoods of a generation of Wall Streeters the high-energy traders in the colorful jackets who have long been the public face of the exchanges, and who now number a mere 4,000. "There's a sense of lament over what's happening," says Caitlin Zaloom, an anthropologist who teaches at New York University and who wrote a book about the cultural shift taking place at exchanges, called Out of the Pits. Many former traders made big money generating incomes in the high six figures and up even if they lacked M.B.A.'s and fancy pedigrees. Ms. McBurney, for example, has a fine arts degree from the Parsons School of Design, and she worked as a jockey at two New Jersey racetracks before heading to Wall Street. "People didn't need connections or a Harvard degree to make it as floor traders," says Ms. Zaloom. "All they needed was a little money and a high tolerance for risks. That opportunity is going away with the abandonment of the trading floor." The numbers illustrate how quickly the opportunity is vanishing. As recently as two years ago, floor traders at the New York Stock Exchange dealt with about 90% of all orders; now they handle 20%. Firms with large floor-trading operations, such as LaBranche & Co. and Bank of America, have let go of hundreds of employees. At the New York Mercantile Exchange, the world's largest marketplace for crude oil, electronic trading volume hit 625,000 futures contracts per day in January, a fivefold increase over year-earlier levels. Meanwhile, orders sent to the floor dropped by 30%, to fewer than 400,000 contracts per day. Exploring options Ms. McBurney says she's exploring lots of career paths, but she hopes to join a money management firm as a trader. Many other floor traders are trying new professions, however. John Barrett left the stock exchange last summer after more than 20 years on the floor. He is trying to get a job as a compliance official at a brokerage firm, or as a schoolteacher near his New Jersey home. He has taken courses at Monmouth University toward his teaching certificate and has done some substitute work. But he hasn't found full-time employment yet. "I'm 48 years old and the father of four girls," Mr. Barrett says. "My feet are to the fire." A flying leap into the unknown poses too great a risk to suit most floor traders, so many of them are trying to reinvent themselves as electronic traders. The trouble is that the attributes that made these individuals successful on a rough-and-tumble trading floor a loud voice and a keen ability to read a rival trader's body language are of no use to someone making trades on a computer screen. Savvy screen traders have a different profile. Many have advanced degrees in mathematics or computer science, and they all have the finger speed of an expert video-game player. "I doubt more than 10% of floor traders will evolve into successful electronic traders," remarks Ms. Zaloom. Michael "Oscar" Carboni is trying to beat the odds. He left his job on the Nymex floor at the end of 2005 and spent most of last year figuring out his next move. He finally decided to convert the garage behind his Staten Island house into a trading desk. Mr. Carboni has invested $50,000 in equipment, including a Toshiba laptop and five wall clocks displaying the time in London, Tokyo and other market centers. The 42-year-old father of three now trades futures contracts from his computer, sometimes working 22 hours a day. He posts market commentaries on YouTube six days a week in hopes of building a following. The mother of reinvention If the venture pays off, Mr. Carboni wants to move his family to Las Vegas, where he would continue trading, build a consulting business that would teach other people to trade, and develop a home renovation business. "You've got to reinvent yourself," says Mr. Carboni, who dropped out of the College of Staten Island and quit a job slicing cold cuts at Waldbaum's 25 years ago to trade metals at Nymex. "No sense crying over what was but isn't anymore." The most difficult adjustment for floor traders may be that whatever profession they choose, they will probably never earn anything close to the money they raked in before. Ex-floor traders say they were able to make as much as $80,000 a day by watching others and sensing where the market was going. For those trading over screens, it's tough to generate half that amount, in part because the visual and aural cues are absent. "Your lifestyle invariably rises up to the amount of money you make, so a lot of ex-floor traders are in for painful adjustments," says Bob McCooey, a former stock exchange trader who joined Nasdaq last November as a senior vice president. Still, ex-floor traders hardly need to apply for relief. Those who bought exchange memberships for a few thousand dollars decades ago hit particularly big jackpots: Their stakes were turned into shares when the exchanges began trading publicly last year, and are now worth millions. That fortunate development gives people like former Nymex trader Dan Dicker the breathing room to keep looking for the right opportunity. The 46-year-old father of two, who studied biochemistry at SUNY Stony Brook before becoming an oil trader, wants to get a job with an energy company. He's starting to get itchy. "When I left the floor in June, I assumed I'd be settled by Labor Day," Mr. Dicker says. "Here it is February, and I'm not settled yet." SAVING THE LORE OF THE FLOOR Caitlin Zaloom knows about the troubles faced by former floor traders. Before entering academia, she was a runner at the Chicago Board of Trade back when it started the transition to electronic trading; she was working as a trader at the London International Financial Futures Exchange when it shut its trading floor entirely in 2000. Last October, she published a book about how computers are transforming exchanges. Now she plans to gather oral histories from floor traders, before their jobs join ticker tape and top hats on Wall Streetâs extinction list. âYou know something is really dead when a professor shows up with a tape recorder,â she says. Comments? AElstein@crain.com
This couldn't be any farther from the truth. No matter the size, the pit is merely along for the ride. The locals left there are merely trying to take advantage of any arb opportunities. They are NOT setting price in any way whatsoever. If you want to make a comparison, you could compare nominal value of contracts traded- Either way, the e-mini leads the way
Profound comment BH, truely profound. However, because I am slow and do not understand your point, woould you mind expanding your comments so that I might. Please do not spare words BH, as the more you write, the greater the chance that I will understand you.
big hog...you are wrong on this one. those locals watch that mini board like a hawk. they have NO control anymore. Hell it was like this 3 years ago. Go down there and watch sometime...they try and make there markets inside the e-mini. wait till rick santelli comes on in afternoon there and watch where the locals behind him are making there bids and offers. Jim
Save your breath, Jim- This guy has no idea. BH, step on a trading floor sometime, and you may learn something. GET A CLUE!!
"Pit sets the price and ES follows"? Doubt that. In any event, the difference between them at any given times is miniscule in the bigger picture. It matters not which leads by a few seconds or tics, except for gun-slinging scalpers.
ES is used for price discovery - SP follows. Not only is the pit a useless appendage but it is actually an inhibitor of true price movement for the S&P. The pit contract trades in .10 increments. The mini (ES) was set at .25 in order to give a political sop to helpless pit "traders" who can only make money by having things rigged for them. The problem is that the people on the floor uses this privilege to fad every ES breakout and arb it with the pit. This causes ES to trade choppier than it should and cuts short rallies. While there will always be people who fad breakouts - what is going on now is excessive and only occurs because the increment differential makes it profitable for the floor. If the CME set the increment of the ES at .10 to match the SP - the useless pit will disappear and you will see the ES become the the trading instrument it was meant to be.