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.

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. 

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.

Badges

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.

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. 

CME alumni

 picture from australianfauna.com

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. 

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.