Tuesday, September 20, 2011

New York Cotton Exchange

I can admit to not knowing much about the New York Cotton Exchange so you're better served reading it's wikipedia entry. Also, click on the photos to enlarge the detail on them.

image source: usslave.blogspot.com

image source gutenberg.org

Relatedly, it might be of interest for some of the book Speculation as a Fine Art and Thoughts on Life by Dickson Watts who was the President of the Cotton Exchange from 1878-1890.
Dickson G Watts-Speculation as a Fine Art and Thoughts on Life-En
There is also a facebook group for people who worked on the New York Cotton Exchange which also has additional photos of the trading pits. 

McDonald's 1989 commercial filmed at CME

The above commercial aired during the Super Bowl in 1989, ironically at about the same time that the FBI were concluding Operation Hedge Clipper and Sour Mash to combat corruption on the exchange floor.  The commercial was filmed on the lower trading floor at the CME and it seems that most of those featured were paid actors rather than locals.  For whatever reason, many in the commercial had trading badges which read LBC and one I saw read MAC. 

Friday, September 16, 2011

For the weekend

Seeing that trading is almost done for the week, I wanted to make sure everyone is prepared w/proper hand signals while out at the bar such as the ones above.  The entire slate is linked here at Modern Drunkard Magazine:

Bar Signs: When words come out, whiskey can't get in.  Remove the roadblocks to drinking success with this arsenal of non-verbal communication.

Of course at the American Liquor Exchange, pictured in 1933 from a picture I own, it always feels like the weekend.  Too bad this exchange didn't last too long because it would've been really useful for my attempt to corner the supply of Lagavulin 21 which has more than tripled in price since buying my stash a few years ago.

Thursday, September 15, 2011


Today's surprise announcement of central bank coordination brought to mind surprise announcements in the past and the most memorable one for me was October 15, 1998 when the Fed cut interest rates just after the bond market closed.  The graphic above of what I saw on the KCBT wall boards was eternally burned into my mind as a result.

Back in 1998 I started out like most at the KCBT as a pit reporter and remember being assigned to work the lightly traded Western Natual Gas contract late that day in October.  Being a pit reporter for the natural gas or Value Line stock index (both no longer trade) was a pretty boring job and most of my days were spent reading magazines, bugging traders for their opinion or looking at charts on CQG.  At the time there was plenty to watch in the market as the Long Term Capital saga was unfolding which lead the Fed to a surprise interest rate cut at 2:14pm CST one day.

Like every big announcement, everyone had an "oh shit" response and immediately eyes turned to the e-mini S&P 500 contract which was launched just a year prior in September 1997.  The emini started soaring higher and it quickly went out of control as the market was exhausted of sell orders and the gaps between prices printing got larger and larger before finally going bid 9999.75 which was the highest price the globex system was designed to handle even though the S&P was trading that day around 1050.  Since then many safeguards have been built by Globex to prevent a similar glitch from happening again.

Eventually the CME busted or adjust all trades above 1085 but in the meanwhile the emini S&P was broken and anyone needing to trade had to send orders for fullsize S&Ps in to the CME pit.  The problem for many was that the ratio was 5 eminis to 1 big S&P so anyone who was short an odd number like 3 and bought a big spoo got net long.  One friend had that situation and he was so pissed off by the market ambush that it was his final day trading. 

Charlie D. famously said that "the only traders in the history of the Board of Trade who have consistently made money over time are the spreaders."  There are a handful of reasons to backup his assertion but the biggest is that spreaders are hedged and thus less likely to get a knockout punch by a surprise announcement.  To consider and guard against any possibility brings to mind the following quote from Guys and Dolls:

One of these days in your travels, a guy is going to show you a brand-new deck of cards on which the seal is not yet broken. Then this guy is going to offer to bet you that he can make the jack of spades jump out of this brand-new deck of cards and squirt cider in your ear. But, son, do not accept this bet, because as sure as you stand there, you're going to wind up with an ear full of cider.

The following article from the December 1998 issue of Futures Magazine summaries the day the emini S&P printed 9999.75

Fed cut wreaks havoc

And this is just one illustration of the various surprises and panics that traders have to go through.  I love to sit and listen to legitimate traders from the floor tell old stories and how they made it through the craziness.  Previously I made the assertion that the closest equivalent to trading is bullriding and continue to stand by it, thinking of what the PBR's doctor said in an interview that "wimps don't make it this far" and certainly the same applies to independent traders who have been through decades of panics because all it takes is one day to get knocked out.

Tuesday, September 13, 2011

In the year 2000

photo credit scenesc.com

I just came across the following article, written for Fortune in 2000, by a journalist that spent a week in and around the pits of the CBOT.  The author does a good job capturing the mentality at that time regarding the threat of electronic trading to the pit and general observations of the trading floor.  Click on the following link to read it:

CBOT Gazes into the Pit The venerable Chicago Board of Trade is waging an uphill battle to keep its open-outcry system relevant in the Internet Age. Our writer spent a week in the pits to see how the fight is going. The conclusion: Always bring Listerine.

Monday, September 12, 2011


photo credit september11news.com
(that photo w/me in it is from 2002 during the moment of silence)

I wasn't going to write a 9/11 post like every other blog, media outlet, etc.... but with a little time on my hands while babysitting some trades, figured might as well show a different perspective.

Unlike most people who can recall how they watched the attacks, I was asleep during the entire morning on 9/11 since I was working nights for the trading group and must've been on the train going home when the first plane struck.  Like most mornings, I went immediately to sleep once home until 2 or 3 in the afternoon.

Not to get off tangent but the old way of doing things for a lot of trading groups such as the small one I was with had the junior guys start clerking on the floor for a bit then switch to working the overnight shift which involved doing a little trading and watching orders for everyone else in the group.  It paid $1800/month and required working 14 hours/day from 530pm to 730am five days a week.  Being only 21 at the time made it a lot easier but even one of my mentors who was a University of Chicago MBA, worked five years at a Big Four accounting firm, and married did the same for $1500/month.  Only reason to note this is that a lot of traders took a long road and often a step down to get the opportunity to trade.

Waking up around 3 in the afternoon it was stunning to read on the internet that the towers were gone and the entire cycle of events took place while I was sleeping.  Just a month prior, I was at NYMEX for a week and every day my routine would be to take the train from the hostel I stayed at to the WTC, get a muffin and coffee then walk outside to sit between the towers before walking over the footbridge to the World Financial Center and NYMEX. 

On the evening of 9/11, the group said I didn't need to go in because everyone got flat or very hedged during the trading session but I remember looking to see that SIMEX eurodollars reopened on the high print that night as the market panicked.  Without having to go into the office and not having a tv at home, I went nearby my apartment to the Old Town Ale House which only had a few old guys in there drinking and watching the news.  The single most memorable moment of 9/11/2001 was at that bar when a sixty year old black gentleman put money in the juke box to play this song:

Wednesday, September 7, 2011

Trading Places: Griffith, Patten and Agriculture Modernity

One thing I came across recently on the web was the following paper:

Trading Places: Griffith, Patten and Agriculture Modernity

It's a lengthy academic paper which is largely based upon the film A Corner in Wheat, directed by D.W. Griffith in 1909, but in many other ways captures the sentiment towards grain speculators at the time.  The film is only about 15 minutes long:

I thought it would be good to juxtapose some of the photos in the paper of political cartoons with some commentary at the end relating a farmer's perspective towards James Patten.  Click on the photos to read them better.

Whereas the farmer's perspective as quoted in the New York Evening Post, 10 April 1909 :

"James A. Patten is the man of the hour in this market and all over the agricultural regions. He is talked about at the corner groceries. The women talk about him over the telephone to their neighbors, they tell of him at the country blacksmith shops, or wherever there is a gathering of farmers. 'He has given us high prices for wheat, corn, and oats, and we are with him,' they say. The coming generation of farmers' boys will be named James Patten Jones, or James Patten Olsen"


Although the following article doesn't fall within the realm of 'tradingpithistory' it does have a lot of similarities with those who left the trading floor as to their self identity.  Justin Bourne, a former pro hockey player who is now a columnist, wrote recently on the effect of leaving a career that largely defines who a person is.  I've watched others make a painful transition out of trading into 'the real world' and it's generally not pretty.  Even when trading has gone through slow periods, a question I posed to myself is what else would I like to be doing and nothing could come close to sticking with trading, it's the greatest job in the world.  Anyways, here's the link to the article:

Bourne Blog: Losing your identity after the hockey’s done

MATIF trading cards

Thanks to Fabien Danis of Paris for sending on the scan of the front and back of some cards used at MATIF by the firm Oddo.  I'm a bit suprised that the A side is red and V is blue (A for acheter "buy" and V for vendre "sell") as those colors are reversed everywhere else. 

Although nothing remains of MATIF at the Bourse de Commerce to indicate it was once an open outcry trading floor, it's worth visiting when in Paris because the interior and exterior of the building is gorgeous.

Tuesday, September 6, 2011

New York style pits

One thing I've never understood is why the New York trading pits were a circular ring rather than an octagonal shape like the pits in Chicago, Minneapolis, Kansas City and the first pit in Milwaukee.  As a result, most NY traders refer to the trading pit as "the ring" and the roots stretch back to at least 1886 as shown below in this sketching from Harper's of the wheat pit at the NY Produce Exchange.

photo credit nypl.org

1906 photo from my personal collection also of wheat pit at NY Produce Exchange

photo credit heatusa.com

Finally the above photo shows the modern 'ring' at NYMEX over 100 years later to show that some standards never changed.

Anyone wishing to read more about the NY Produce Exchange can read the Harper's article from 1886 which elaborates extensively about the many features although it's pits, I mean rings, were never near as large as Chicago's.  An interesting thing in the article for me was that the NY Produce Exchange had a Gratuity Fund for the widow or heirs of members who died.  To this day the CME hits up all us members for $100/year for the Gratuity Fund for the same reasons.
Home | History | About |
| Shop | Basics | Prices/Quantities | Months | Years | Functions | Participants
Debrouillard Group, tradingpithistory.com