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Open outcry

Open outcry

Overview


Open outcry is the name of a method of communication between professionals on a stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

 or futures exchange
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...

. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.

Examples of markets which use this system in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 are the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

, the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

, the Chicago Board of Trade
Chicago Board of Trade
The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...

, and the Chicago Board Options Exchange
Chicago Board Options Exchange
The Chicago Board Options Exchange , located at 400 South LaSalle Street in Chicago, is the largest U.S. options exchange with annual trading volume that hovered around one billion contracts at the end of 2007...

. In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, the London Metal Exchange
London Metal Exchange
The London Metal Exchange is the futures exchange with the world's largest market in options, and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, along with longer-dated contracts up to 123 months, it also...

 still makes use of open outcry.

The open outcry system is being replaced by electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...

 systems (such as CATS
CATS (trading system)
CATS is an automated exchange system developed for the Toronto Stock Exchange in 1977. CATS was one of the first technologies allowing for a full automation of the price-setting process in a stock exchange. This technology was implemented in several other stock exchanges in the 1980s...

 and Globex).
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Encyclopedia


Open outcry is the name of a method of communication between professionals on a stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

 or futures exchange
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...

. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.

Examples of markets which use this system in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 are the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

, the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

, the Chicago Board of Trade
Chicago Board of Trade
The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...

, and the Chicago Board Options Exchange
Chicago Board Options Exchange
The Chicago Board Options Exchange , located at 400 South LaSalle Street in Chicago, is the largest U.S. options exchange with annual trading volume that hovered around one billion contracts at the end of 2007...

. In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, the London Metal Exchange
London Metal Exchange
The London Metal Exchange is the futures exchange with the world's largest market in options, and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, along with longer-dated contracts up to 123 months, it also...

 still makes use of open outcry.

The open outcry system is being replaced by electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...

 systems (such as CATS
CATS (trading system)
CATS is an automated exchange system developed for the Toronto Stock Exchange in 1977. CATS was one of the first technologies allowing for a full automation of the price-setting process in a stock exchange. This technology was implemented in several other stock exchanges in the 1980s...

 and Globex). The supporters of electronic trading claim that they are faster, cheaper, more efficient for users, and less prone to manipulation by market makers and broker/dealers
Broker-dealer
A broker-dealer is a term used in United States financial services regulations. It is a natural person, a company or other organization that trades securities for its own account or on behalf of its customers....

. However, many traders advocate for the open outcry system on the basis that the physical contact allows traders to speculate as to a buyer/seller's motives or intentions and adjust their positions accordingly. Today, most stocks
Stocks
Stocks are devices used in the medieval and colonial American times as a form of physical punishment involving public humiliation. The stocks partially immobilized its victims and they were often exposed in a public place such as the site of a market to the scorn of those who passed by...

 and futures contracts are no longer traded using open outcry due to the lower cost of the aforementioned technological advances.

A "trading floor" is a trading venue. This expression often refers to a place where traders
Trader (finance)
A trader is someone in finance who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing...

 or stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...

s meet in order to buy and sell equities, also called a pit. Sometimes, the expression "trading floor" is also used to refer to the "trading room
Trading room
A trading-room gathers traders operating on financial markets.The trading-room is also often called the front office.The terms dealing-room and trading-floor are also used, the latter being inspired from that of a open outcry stock exchange....

" or "dealing room", i.e. the office space where market activities are concentrated in investment banks or brokerage houses. But, technically speaking, these two spaces are different.

Hand signals


Floor hand signals are used to communicate buy and sell information in an open outcry trading environment. The system is used at securities exchanges such as the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

.

Traders usually flash the signals quickly across a room to make a sale or a purchase. Signals that occur with palms facing out and hands away from the body are an indication the gesturer wishes to sell. When traders face their palms in and hold their hands up, they are gesturing to buy.

Numbers one through five are gestured on one hand, and six through ten are gestured in the same way only held sideways at a 90 degree angle (index finger out sideways is six, two fingers is seven, and so on). Numbers gestured from the forehead are blocks of ten, and blocks of hundreds and thousands can also be displayed. The signals can otherwise be used to indicate months, specific trade or option combinations, or additional market information.

These rules may vary among exchanges or even among floors within the same exchange; however, the purpose of the gestures remains the same.

Conversion to electronic trading

  • The London Stock Exchange
    London Stock Exchange
    The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...

     moved to electronic trading in 1986.
  • The Borsa Italiana
    Borsa Italiana
    The Borsa Italiana S.p.A., based in Milan, is Italy's main stock exchange. It was privatised in 1997 and is a part of the London Stock Exchange Group plc since 2007. In 2005, the companies listed on the Borsa were worth US$890 billion...

    , Italy's stock market, located in Milan, moved to electronic trading in 1994.
  • The Toronto Stock Exchange
    Toronto Stock Exchange
    Toronto Stock Exchange is the largest stock exchange in Canada, the third largest in North America and the seventh largest in the world by market capitalisation. Based in Canada's largest city, Toronto, it is owned by and operated as a subsidiary of the TMX Group for the trading of senior equities...

     (TSX) adopted electronic trading in 1997.
  • International Petroleum Exchange
    International Petroleum Exchange
    The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

     (IPE) moved to electronic trading in 2005.
  • Minneapolis Grain Exchange
    Minneapolis Grain Exchange
    The Minneapolis Grain Exchange was formed in 1881 as a regional cash marketplace to promote fair trade and to prevent trade abuses in wheat, oats and corn....

     (MGEX) moved to electronic trading in 2008.
  • Johannesburg Stock Exchange
  • New York Stock Exchange
    New York Stock Exchange
    The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...

    , 2006-2007, under John Thain
    John Thain
    John Alexander Thain is an American businessman, investment banker, and currently chairman and CEO of the CIT Group.Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America...


  • New York Mercantile Exchange
    New York Mercantile Exchange
    The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

    , 2006.


Since the 1980s, Nymex had held a virtual monopoly on 'open market' oil futures trading. However the electronically based IntercontinentalExchange
IntercontinentalExchange
IntercontinentalExchange, Inc., known as ICE, is an American financial company that operates Internet-based marketplaces which trade futures and over-the-counter energy and commodity contracts as well as derivative financial products...

, or ICE, began trading oil contracts
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...

 that were extremely similar to Nymex's in the early 00s. Nymex began to lose business and/or market share almost immediately. The pit-traders at Nymex had been resisting the electronic move for decades, but the executives believed the exchange had to move to the electronic format, or it would cease to exist as a viable business. The executives introduced CME's Globex system into Nymex in 2006.


Open outcry is the name of a method of communication between professionals on a stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

 or futures exchange
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...

. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.

Examples of markets which use this system in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 are the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

, the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

, the Chicago Board of Trade
Chicago Board of Trade
The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...

, and the Chicago Board Options Exchange
Chicago Board Options Exchange
The Chicago Board Options Exchange , located at 400 South LaSalle Street in Chicago, is the largest U.S. options exchange with annual trading volume that hovered around one billion contracts at the end of 2007...

. In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, the London Metal Exchange
London Metal Exchange
The London Metal Exchange is the futures exchange with the world's largest market in options, and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, along with longer-dated contracts up to 123 months, it also...

 still makes use of open outcry.

The open outcry system is being replaced by electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...

 systems (such as CATS
CATS (trading system)
CATS is an automated exchange system developed for the Toronto Stock Exchange in 1977. CATS was one of the first technologies allowing for a full automation of the price-setting process in a stock exchange. This technology was implemented in several other stock exchanges in the 1980s...

 and Globex). The supporters of electronic trading claim that they are faster, cheaper, more efficient for users, and less prone to manipulation by market makers and broker/dealers
Broker-dealer
A broker-dealer is a term used in United States financial services regulations. It is a natural person, a company or other organization that trades securities for its own account or on behalf of its customers....

. However, many traders advocate for the open outcry system on the basis that the physical contact allows traders to speculate as to a buyer/seller's motives or intentions and adjust their positions accordingly. Today, most stocks
Stocks
Stocks are devices used in the medieval and colonial American times as a form of physical punishment involving public humiliation. The stocks partially immobilized its victims and they were often exposed in a public place such as the site of a market to the scorn of those who passed by...

 and futures contracts are no longer traded using open outcry due to the lower cost of the aforementioned technological advances.

A "trading floor" is a trading venue. This expression often refers to a place where traders
Trader (finance)
A trader is someone in finance who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing...

 or stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...

s meet in order to buy and sell equities, also called a pit. Sometimes, the expression "trading floor" is also used to refer to the "trading room
Trading room
A trading-room gathers traders operating on financial markets.The trading-room is also often called the front office.The terms dealing-room and trading-floor are also used, the latter being inspired from that of a open outcry stock exchange....

" or "dealing room", i.e. the office space where market activities are concentrated in investment banks or brokerage houses. But, technically speaking, these two spaces are different.

Hand signals


Floor hand signals are used to communicate buy and sell information in an open outcry trading environment. The system is used at securities exchanges such as the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

.

Traders usually flash the signals quickly across a room to make a sale or a purchase. Signals that occur with palms facing out and hands away from the body are an indication the gesturer wishes to sell. When traders face their palms in and hold their hands up, they are gesturing to buy.

Numbers one through five are gestured on one hand, and six through ten are gestured in the same way only held sideways at a 90 degree angle (index finger out sideways is six, two fingers is seven, and so on). Numbers gestured from the forehead are blocks of ten, and blocks of hundreds and thousands can also be displayed. The signals can otherwise be used to indicate months, specific trade or option combinations, or additional market information.

These rules may vary among exchanges or even among floors within the same exchange; however, the purpose of the gestures remains the same.

Conversion to electronic trading

  • The London Stock Exchange
    London Stock Exchange
    The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...

     moved to electronic trading in 1986.
  • The Borsa Italiana
    Borsa Italiana
    The Borsa Italiana S.p.A., based in Milan, is Italy's main stock exchange. It was privatised in 1997 and is a part of the London Stock Exchange Group plc since 2007. In 2005, the companies listed on the Borsa were worth US$890 billion...

    , Italy's stock market, located in Milan, moved to electronic trading in 1994.
  • The Toronto Stock Exchange
    Toronto Stock Exchange
    Toronto Stock Exchange is the largest stock exchange in Canada, the third largest in North America and the seventh largest in the world by market capitalisation. Based in Canada's largest city, Toronto, it is owned by and operated as a subsidiary of the TMX Group for the trading of senior equities...

     (TSX) adopted electronic trading in 1997.
  • International Petroleum Exchange
    International Petroleum Exchange
    The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

     (IPE) moved to electronic trading in 2005.
  • Minneapolis Grain Exchange
    Minneapolis Grain Exchange
    The Minneapolis Grain Exchange was formed in 1881 as a regional cash marketplace to promote fair trade and to prevent trade abuses in wheat, oats and corn....

     (MGEX) moved to electronic trading in 2008


.
  • Johannesburg Stock Exchange
  • New York Stock Exchange
    New York Stock Exchange
    The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...

    , 2006-2007, under John Thain
    John Thain
    John Alexander Thain is an American businessman, investment banker, and currently chairman and CEO of the CIT Group.Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America...

     Technology squeezes out real, live traders, Adam Shell, USA Today, 2007 7 11He Fixed the NYSE. Can He Fix Merrill?, Bloomberg Businessweek (author not listed on website) NOVEMBER 26, 2007

  • New York Mercantile Exchange
    New York Mercantile Exchange
    The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

    , 2006.


Since the 1980s, Nymex had held a virtual monopoly on 'open market' oil futures trading. However the electronically based IntercontinentalExchange
IntercontinentalExchange
IntercontinentalExchange, Inc., known as ICE, is an American financial company that operates Internet-based marketplaces which trade futures and over-the-counter energy and commodity contracts as well as derivative financial products...

, or ICE, began trading oil contracts
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...

 that were extremely similar to Nymex's in the early 00s. Nymex began to lose business and/or market share almost immediately. The pit-traders at Nymex had been resisting the electronic move for decades, but the executives believed the exchange had to move to the electronic format, or it would cease to exist as a viable business. The executives introduced CME's Globex system into Nymex in 2006.


Open outcry is the name of a method of communication between professionals on a stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

 or futures exchange
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...

. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.

Examples of markets which use this system in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 are the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

, the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

, the Chicago Board of Trade
Chicago Board of Trade
The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...

, and the Chicago Board Options Exchange
Chicago Board Options Exchange
The Chicago Board Options Exchange , located at 400 South LaSalle Street in Chicago, is the largest U.S. options exchange with annual trading volume that hovered around one billion contracts at the end of 2007...

. In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, the London Metal Exchange
London Metal Exchange
The London Metal Exchange is the futures exchange with the world's largest market in options, and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, along with longer-dated contracts up to 123 months, it also...

 still makes use of open outcry.

The open outcry system is being replaced by electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...

 systems (such as CATS
CATS (trading system)
CATS is an automated exchange system developed for the Toronto Stock Exchange in 1977. CATS was one of the first technologies allowing for a full automation of the price-setting process in a stock exchange. This technology was implemented in several other stock exchanges in the 1980s...

 and Globex). The supporters of electronic trading claim that they are faster, cheaper, more efficient for users, and less prone to manipulation by market makers and broker/dealers
Broker-dealer
A broker-dealer is a term used in United States financial services regulations. It is a natural person, a company or other organization that trades securities for its own account or on behalf of its customers....

. However, many traders advocate for the open outcry system on the basis that the physical contact allows traders to speculate as to a buyer/seller's motives or intentions and adjust their positions accordingly. Today, most stocks
Stocks
Stocks are devices used in the medieval and colonial American times as a form of physical punishment involving public humiliation. The stocks partially immobilized its victims and they were often exposed in a public place such as the site of a market to the scorn of those who passed by...

 and futures contracts are no longer traded using open outcry due to the lower cost of the aforementioned technological advances.

A "trading floor" is a trading venue. This expression often refers to a place where traders
Trader (finance)
A trader is someone in finance who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing...

 or stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...

s meet in order to buy and sell equities, also called a pit. Sometimes, the expression "trading floor" is also used to refer to the "trading room
Trading room
A trading-room gathers traders operating on financial markets.The trading-room is also often called the front office.The terms dealing-room and trading-floor are also used, the latter being inspired from that of a open outcry stock exchange....

" or "dealing room", i.e. the office space where market activities are concentrated in investment banks or brokerage houses. But, technically speaking, these two spaces are different.

Hand signals


Floor hand signals are used to communicate buy and sell information in an open outcry trading environment. The system is used at securities exchanges such as the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

.

Traders usually flash the signals quickly across a room to make a sale or a purchase. Signals that occur with palms facing out and hands away from the body are an indication the gesturer wishes to sell. When traders face their palms in and hold their hands up, they are gesturing to buy.

Numbers one through five are gestured on one hand, and six through ten are gestured in the same way only held sideways at a 90 degree angle (index finger out sideways is six, two fingers is seven, and so on). Numbers gestured from the forehead are blocks of ten, and blocks of hundreds and thousands can also be displayed. The signals can otherwise be used to indicate months, specific trade or option combinations, or additional market information.

These rules may vary among exchanges or even among floors within the same exchange; however, the purpose of the gestures remains the same.

Conversion to electronic trading

  • The London Stock Exchange
    London Stock Exchange
    The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...

     moved to electronic trading in 1986.
  • The Borsa Italiana
    Borsa Italiana
    The Borsa Italiana S.p.A., based in Milan, is Italy's main stock exchange. It was privatised in 1997 and is a part of the London Stock Exchange Group plc since 2007. In 2005, the companies listed on the Borsa were worth US$890 billion...

    , Italy's stock market, located in Milan, moved to electronic trading in 1994.
  • The Toronto Stock Exchange
    Toronto Stock Exchange
    Toronto Stock Exchange is the largest stock exchange in Canada, the third largest in North America and the seventh largest in the world by market capitalisation. Based in Canada's largest city, Toronto, it is owned by and operated as a subsidiary of the TMX Group for the trading of senior equities...

     (TSX) adopted electronic trading in 1997.
  • International Petroleum Exchange
    International Petroleum Exchange
    The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

     (IPE) moved to electronic trading in 2005.
  • Minneapolis Grain Exchange
    Minneapolis Grain Exchange
    The Minneapolis Grain Exchange was formed in 1881 as a regional cash marketplace to promote fair trade and to prevent trade abuses in wheat, oats and corn....

     (MGEX) moved to electronic trading in 2008


.
  • Johannesburg Stock Exchange
  • New York Stock Exchange
    New York Stock Exchange
    The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...

    , 2006-2007, under John Thain
    John Thain
    John Alexander Thain is an American businessman, investment banker, and currently chairman and CEO of the CIT Group.Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America...

     Technology squeezes out real, live traders, Adam Shell, USA Today, 2007 7 11He Fixed the NYSE. Can He Fix Merrill?, Bloomberg Businessweek (author not listed on website) NOVEMBER 26, 2007

  • New York Mercantile Exchange
    New York Mercantile Exchange
    The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

    , 2006.


Since the 1980s, Nymex had held a virtual monopoly on 'open market' oil futures trading. However the electronically based IntercontinentalExchange
IntercontinentalExchange
IntercontinentalExchange, Inc., known as ICE, is an American financial company that operates Internet-based marketplaces which trade futures and over-the-counter energy and commodity contracts as well as derivative financial products...

, or ICE, began trading oil contracts
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...

 that were extremely similar to Nymex's in the early 00s. Nymex began to lose business and/or market share almost immediately. The pit-traders at Nymex had been resisting the electronic move for decades, but the executives believed the exchange had to move to the electronic format, or it would cease to exist as a viable business. The executives introduced CME's Globex system into Nymex in 2006. The Asylum, Leah McGrath Goodman, 2011, Harper Collins

External links