Sunday, November 28, 2010

there are old traders and bold traders but none w/more style

 image from wikipedia

While in LA to watch the Blackhawks and rereading Taleb's books, I had a good laugh thinking of a friend and I's discussion about our brief time working the phones on order desks at the S&P pit when we first got to the CME.  The nine months I was a desk clerk it involved talking to Japanese traders in broken English or complete a-holes in NYC, pretty much everyday was miserable and I couldn't wait to get on the other side of the phone.  My friend on the other hand got to speak w/Mr Norm Zada, most famously known as the founder of Perfect 10 magazine, but also a money manager and highly esteemed academic mind.  Supposedly some of the models would handle secretarial duties such as checking trades, etc... so my bud would have to chat w/them and to *ahem* put a face to the name, their desk got a stack of magazines sent over. 

There are a lot bigger and more successful traders but I haven't heard of anyone conducting their operation with as much style and enjoyment as Mr. Zada, especially considering he only had one down year since inception. 

Friday, November 26, 2010

*updated* trading pits in New Orleans

photo credit:

The New Orleans Commodities Exchange began it's short run in 1981 before moving to Chicago to become the Chicago Corn and Rice Exchange in 1983 where it was subsequently absorbed by the MidAmerican Exchange (MidAm) in 1986.  There is very little mention of the exchange but Charles McCain wrote an article in 1981 which does a great job of describing the exchange and the original copy also shows photos of the trading floor:

SOLD!  Bidding on Tomorrow At the Commodity Exchange pdf copy
if you don't have a .pdf view you can use this link as a regular text copy: link

I first learned of the exchange in 1998 as I saw it on my road map during a visit to New Orleans for Mardis Gras.  One morning to help walk off a hangover acquired on Rue Burbon, I wandered into the building named the New Orleans Board of Trade which at the time still had the exchange's wall boards noting prices of the Rice and other grain contracts.  Now the building is mostly used for events like weddings, etc... and is worth taking a peek at next time you're in NOLA although I'd imagine the wallboards are gone by now.

"KC" posted the following in the comments sections and it's so important it needs to get bumped up to the main page.  Thanks KC for the wonderful commentary and educating us all on the New Orleans Exchange!

"The New Orleans exchange came to Chicago a few months after they closed in NO, the open interest had become dominated by Merril Lynch and Merril was critical in shutting the doors and settling contracts. I don't think that the Gulf delivery soybeans and corn made the move but the rice and cotton contracts did. The cotton contract traded briefly under two different contracts but was never successful. The exchange (really just the rice market) traded on the Mid-Am floor as the Chicago Rice and Cotton Exchange, initially on the Mid-Am floor on the 2nd floor of the Insurance Exchange Building just west of the CBOT Building and then on the Mid-Am floor in the old CME at Jackson and the river before the rice moved to the CBOT ag floor where it shared a pit with wheat options and corn options where the current corn option pit now stands. At that time the Mid-Am moved to the current out trade room on the CME/CBOT floor, which was before the Mid-Am moved to the old bond room and then to its current place on the grain floor.

The cotton contract never took hold, it was a longer staple cotton than what is traded in NY, I recall that they had problems with delivery, which was also a problem in the rice market. Rice originally had a delivery area that stretched from Arkansas to Texas, it was later restricted to the counties around Stuttgart, Arkansas. The larger delivery increased basis risk.

A number of the old New Orleans exchange seats were originally sold to Chicago grain traders due to the Gulf delivery mechanism and frankly, the lure of New Orleans as a business destination and there is still one member on the grain room floor who came from the New Orleans exchange and is likely in that photo. KC"

Tuesday, November 23, 2010

Another hilarious video

This video falls outside the blogs mandate of "trading pit history" but it's so funny and the 255 views it has so far doesn't do it comedic justice.  A couple things to know before watching, it pokes fun of the trading arcade scene in Gibraltar and gets the characters pretty accurately according to a friend of a friend who traded there in an arcade.  "Brass" is British slang for prostitute so to understand it makes it funnier before watching.

old BM&F floor in Sao Paulo

Image from

Over the past few days I was in Brazil and noticed that even though the BM&F trading floor closed in mid 2009, it remains intact as a backdrop for financial newscasts.  Because it's in the unattractive downtown of Sao Paulo, I can't imagine it getting occupied by a large trading firm like in many other cities or even turned into a gym like floors in Chicago (old CME) or Singapore (former SIMEX) were made into so my belief is that they don't have anything else to use it for and just leave it as is. 

The above photo dating from 2008 shows one of the most active pits at BM&F and as I previously mentioned, there were zero women working on the trading floor that I ever observed from a few trips there.  Yellow badges are brokers and blue badges are for locals so as you can see it's not a local dominated pit like every other exchange generally has.  Because of this, I always got the impression that the BM&F pits were more 'foot solider' oriented than others and those making decisions could use the wireless handsets directly into the floor broker's ear.  A friend of a friend used to work on that floor so hopefully I can learn whatever handsignals were used there. 

Some friends who trade SPs from Rio (nice gig, eh?) let me know after a recent skid of hard luck what SP really stands for, "super pica" which in Portuguese translates to "big cock."  Cutural differences aside, traders are pretty much the same anywhere and speak the same language.

Wednesday, November 17, 2010

While on the subject of Arthur Cutten....

picture from wikipedia cause I'm too lazy to walk a few blocks to take it myself

Beside the CBOT building currently are two statues representing Industry and Agriculture which once graced above the entrance to the prior CBOT building.  When the previous CBOT building was torn down, the statues (somehow) became property of Arthur Cutten on his suburban estate which eventually became the Hidden Lake Forest Preserve after Cutten's death.  The statues eventually were recovered in the past decade and were moved back to the CBOT location. 

There aren't a lot of superstitions or routines that I believe in but one thing I always do is touch the cornucopia on the statue of Agriculture whenever I walk by as a reminder of the potential bounty the markets have to offer.  The statue pictured above is similar the Goddess Fortuna who is shown with a cornucopia in one hand but a rudder in the other.  If there is a mythical Goddess for traders to think of, Fortuna is certainly the most fitting:

photo credit

"She was to be found on the back of many Roman coins, holding a cornucopia in one hand and a rudder in the other.  She was beautiful and usually wore a light tunic and a coy smile.  Her name was Fortune.  She had originated as a fertility goddess, the firstborn of Jupiter, and was honored with a festival on the 25th of May and with temples throughout Italy, visited by the barren and farmers in search of rain.  But gradually her remit had widened, she had become associated with money, advancement, love and health.  The cornucopia was a symbol of her power to bestow favours, the rudder a symbol of her more sinister power to change destinies.  She could scatter gifts, then with terrifying speed shift the rudder's course, maintaining an imperturbable smile as she watched us choke to death on a fishbone or disappear in a landslide." 

- Alain de Botton The Consolations of Philosophy

Arthur Cutten and the beginning of position limits

Prior to the crash of 1929, there were few if any speculators who swung a larger line at the CBOT than Arthur Cutten.  Like many young men from the Midwest, Cutten made his way to Chicago and apprenticed at the CBOT under a broker before striking out on his own to become a self capitalized trader at the exchange.  Within a couple decades, Cutten would amass large enough trading positions to become well known and an influential market force to the point that the U.S. Government took action to reduce the influence of such large traders.  In 1936 the U.S. legislature passed the Commodities Exchange Act which instilled speculative position limits in the futures markets and those remain today. 

As a smaller trader who tries to stay hedged and not to get in over his head, I've always looked upon exceptionally large traders with wonderment.  Psychologically the largest traders have a risk appetite which is tough to explain as they continue to do things bigger and bigger, rarely leaving at the top.  Cutten lost a substantial part of his fortune in the crash of 1929 but was able to live a comfortable life until his death in 1936.

Monday, November 15, 2010

CBOT old financial room

Pictured in the photo I purchased above (no photographer credited) is the old CBOT financial room which is also the original trading room at the CBOT.  When the grains moved to their current trading floor in 1982, the financials were able to occupy the entire room and remained trading there until the construction of the new CBOT financial floor in 1997.  After the move to the new floor in 1997, this room became occupied by the Mid American Exchange (MidAm) and after the MidAm was closed in 2001, it was leased out as it currently is today by options trading firm Peak6 and the room is prominently displayed on the homepage of their website.  As usual, click on the photo to enlarge for detail. 

Sunday, November 14, 2010

MATIF signals

During my Paris visit, Mr. Fabien Danis was kind enough to spend a couple hours with me to go over the signals from his time in the trading pits of MATIF and his badge is pictured above.  He worked with FIMAT which is the trading arm of French bank Societe General and the name FIMAT was derived simply by spelling the name of the exchange, MATIF, backwards.  Sometime in the next week or two, photos of the signals should be shot and put up on the website once some backend tech stuff is also done to setup a new gallery.


A lot of people would ask what my badge PNOY means and it's short for Pinoy as I'm part Filipino like my man Manny Pacquiao in the above video.  Every exchange has different acronyms such as KCBOT is limited to 1 or 2 letters, CBOT up to 3 letters, CME is generally 2-4 letters but I've seen older members with 5 or 6 letters.

Originally I wanted to use SLIM but SLI was taken by a big S&P trader and if someone had the first 3 letters, another couldn't be added on for a new badge.  One hilarious badge I wish I took that someone else had is DUDE and another funny one I saw was some Mexican guy whose badge was TACO.  A lot of people used initials but to see humor and individuality was all part of the trading pits.

Wednesday, November 10, 2010

Conversation with a local

I need a laugh after getting disemboweled by the market lately, it seems like every local has had the same back and forth so it was great that someone created the above video.  My wife was laughing harder than I was when she heard it because it's the exact same scenario when I met anyone of her friends or family. 

Thursday, November 4, 2010

CME alumni

 picture from

There's been a handful of people from CME trading pits who went on to larger fame, perhaps most notably Mr Skin, but CME alumni also includes noted author Nassim Taleb who was registered as a floor trader for just under two years from 1991 to 1993.  Most colleagues from the floor weren't around during his time or were in other pits but I came across a funny comment on what he was like trading down there, although it's accuracy can't be vouched for.  (I'm going to Lebanon in a week so was thinking of Taleb's books)

I like Taleb's basic theories but mostly because he thinks everyone else is completely full of shit.  Others might simply call it skepticism but that's too soft of a term.  If there's one characteristic amongst the good traders I've encountered is that they think everyone else is completely full of shit.  No doubt there's people who think I'm full of shit and that's great because I think you're full of shit as well.  Somewhere in the reptilian brain, this characteristic has evolved to allow people to survive the markets because well...with rare exceptions everyone is completely full of shit, particularly in the financial industry.  My belief is such an attitude is necessary to match wits against other participants and take the other side of trades to the point which the longer one trades, the more it's reinforced. 

Wednesday, November 3, 2010

U.S. Marines in the trading pits

The US Marine Corps will be celebrating their 235th anniversary in a week on November 10th and all Americans owe a debt of gratitude to their service.  I'm honored to have cousins who are Marines and if given another lifetime would like to become one myself.  It is humbling that the Marines could learn stuff from pit traders as they partnered with NYMEX in the 1990s on exercises to learn of functioning under stress and decision making.  A few articles linked below outline some findings:

Virtual Stress By Capt. Mike Snyder

Cultivating Intuitive Decisionmaking by Gen. Charles Krulak

War in the Pits by F.J. West Jr.
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