Ending an era, CME Group to shutter most futures pits

Wed Feb 4, 2015 10:46pm EST
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By Tom Polansek

(Reuters) - The world's largest futures market operator will shutter almost all of its open-outcry futures pits by July 2, ringing the closing bell on a once-raucous tradition that has been in decline since the rise of computerized trading.

The decision by CME Group Inc (CME.O: Quote), announced on Wednesday, ousts traders of products ranging from grain and livestock in Chicago to gold and oil in New York. Once the only way to buy or sell a futures contract to hedge against price moves, open-outcry trading is now only 1 percent of total futures trading volume, according to the exchange operator.

Options pits, which have stayed active in the face of electronic trading, will mostly remain open in both cities.

CME is expected to provide more details on its decisions when it reports quarterly earnings on Thursday.

Traders had braced for the closures of the futures pits after watching more and more business migrate to machines over two decades. Still, many said they were disappointed the day had finally come and felt uncertain about the future.

"We all knew it was going to end," said Jerry Israelov, who has spent 25 years in CME's open-outcry pits in Chicago, including the last 10 years trading wheat futures.

The closures will mark the end of an era for the futures industry, which built itself around the pits in Chicago. Traders made and lost fortunes there and treated the trading floors like a schoolyard.

When markets were slow, typically around the holidays, pit traders would find other ways to entertain themselves, like making bets on how many cheeseburgers or chicken nuggets a clerk could eat in a few minutes. And when conflicts arose, they sometimes came to blows, earning their reputations as a rough-and-tumble group.   Continued...

Chicago Mercantile Exchange (CME) group's Chairman Emeritus Leo Melamed speaks during an interview with Reuters in Tokyo in this June 30, 2014 file photo.REUTERS/Yuya Shino/Files