Discussion in 'Commodity Futures' started by JangoFolly, Apr 4, 2007.
Is this a function of going public? Any insights?
No. It's the effect of the screen.....
Wow, les than a third of the price it was less than 8 months ago. Is NYSE suffering the same percentage effect as well?
the bubble burst
With the electronic contracts increasing overall volume, I would have thought the opposite.
Lessees pay up for the right to trade in the pits. The only advantage of a seat for screen trading is the commission savings.
You used to pay for the right to scalp the public for 5 or 10 cents...but with the bid/offer on the screen typically being just a penny most of the time, and with 70%+ of the volume done on Globex, it is the pit that keys off the screen and the opportunity to scalp the public all day long has been diminished. You still need the pit for back months, spreads, strips, and options, so I don't think it will be gone as soon as some of the some pessimists predict.
I appreciate the insights. I was focused on the aspect of commissions savings.
Trading on the floor is not as inexpensive as it seems.
I used to trade for myself on one of the floors in NY in late seventies and early eighties. (In those years in NY one could not lease a seat yet.)
One had to have one's own clerk physically match the trades with the other party's clerk within minutes. In addition to exchange fees one had to pay the clearing broker for clearing the trades.
I remember it cost about $2 round turn. One also had to post a performance bond (guarantee) In the late seventies it was a mere 100K. Later, because a lot of traders blew out they raised it to 1 million. After I left sometime in the late eighties or in the nineties they have raised the guarantee requirements to unlimited.
I wonder how much an unlimited liability performance bond costs a trader today.
Twenty years later trading on the screen, nonmember, I am paying IB roughly $4 per round turn all fees included. Not a bad deal. Plus I am saving big on cab fare.
What's more important is that CL is a large contract with a lot of movement and the $4 RT commission
does not make or brake the trader. One's level of skill and discipline is the main determining factor in success.
Floor trading certainly has many advantages but at this point I would not want to exchange trading in a quiet comfortable environment - where I can think clearly - with the physically demanding chaotic conditions on the floor.
Who knows maybe a lot of other people are coming to the same conclusion.
Would anyone care to comment on the cost structure of trading on the floor today? TIA.
Can anyone tell a young want to be pit trader just what they think the future holds for the pits of Chicago and New York? Is fully electronic the future or are we going to see half and half trading for sometime now or will the pits live forever? I am currently a grain and energy trader in the futures but also deal with the options and would like to trade in the pit after high school and college. Livestock is almost completely pit traded so are markets like HRSW in Minneapolis HRWW in KC and lumber and milk. In my oppinion making these contracts fully electronic would get you 0 liquidity. They need the pit.
People seem to complain about the guys down in the pit taking you for huge amounts of money because of slippage and stop running and such. But really in a fully electronic market you are getting the same types of things done to you but only by smart computers that some geek squad has developed. If you ask me I would rather a human that can be outsmarted and has fear and greed emotions try to take me for a few bucks than a super smart fast thinking computer program.
I have basically 6 years untill I get done with the rest of high school and complete my 4 years of college. My question is will the great commodity pits be around in 6 years or be a thing of the past? If they do become extinct will the options pits go as fast or are they going to be doing business for sometime now?
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