Thursday, December 16, 2010

End of session

I'm taking a sabbatical from the blog for a few months mostly because I'll be out of the country for an extended period of time and also so I can focus on arranging some of the hand signal information in preparation for a self published book which hopefully will be out in a year.  See ya in April...

Tuesday, December 14, 2010

Electronic trading cards

When pit traders thought of automated trading, one of the early concepts was to use handheld terminals rather than cardboard trading cards and although an effort was made to convert traders to using them, it didn't gain much steam.  The concept of electronic trading cards was developed shortly after the FBI sting so in 1990 the CBOT and CME began their effort to find the vendor for electronic cards.  One reason why the developement came after the FBI sting was to enhance the audit trail of trades and the FBI sting highlighted the flaws in the existing audits.

As with any sort of evolution, the push for electronic cards was a difficult one although in 1991 testing began in mock trading sessions.  The above photo is from 1996 and the caption reads that only 10 traders at the CBOT used it with regularity and at the time there was noone at the Merc who used it outside of mock trading so shortly after the effort was discontinued.

I don't know at what point the electronic card program was discontinued within the pit but it came back in different incarnations.  One thing that was pushed during the short time I clerked for a desk at the CBOT (late '99-mid 2000) was electronic order tickets from the desk to the pit broker although I forget what the name of the software/program was.  For the past decade or so, the CME has provided handheld, wireless GLOBEX access to floor traders and I think that the software is proprietary and only used for such handhelds.

Thursday, December 9, 2010

Spoo pit circa 1982

The above photo is from October 1982 and shows the S&P 500 pit at the CME just months after launch of the contract earlier in the year on April 21st.  The Merc wasn't the first to launch a stock index contract and was beat by the Kansas City Board of Trade's Value Line contract by a couple months.   

Friday, December 3, 2010

FBI Operation Sourmash and Operation Hedge Clipper

In the above photo is an undercover FBI agent, can you guess who?  I'll give the answer at the bottom of the post. 

In the 1986, the FBI began an investigation into corruption in the Chicago trading pits at the urging of commodity firm Archer Daniels Midland who helped hire and train some undercover agents.  At the CBOT the codename was Operation Sour Mash and at the CME it was given the name Operation Hedge Clipper.  In January 1989 the investigation was closed as details began to leak out and the Chicago Tribune was ready to break the story which resulted in 46 traders being indicted on over 1,500 counts including, racketeering, fraud and lying to the Feds.  Once the news of the investigation broke, the FBI continued to have undercover agents work on the floor to listen to the fallout.

The NFA records of the undercover agents continue to exist under their alias at the NFA's BASIC background records which all current and former floor traders are required to be listed.

For anyone wanted to read more about this fascinating episode, I highly suggest the book Brokers, Bagmen and Moles which was put out by a couple journalists. 

For the lazy, here is a NYT article written a couple weeks after the sting was announced:
F.B.I. Commodities 'Sting': Fast Money, Secret Lives

Answer to trivia question: VOGL in the lower left corner was FBI agent Dietrich Volk, alias Peter Vogel who was given the background of being the nephew of a wealthy Uruguayan who wished to get further into commodities trading.  
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