September 20, 2012 / 9:18 PM / in 5 years

Exclusive: ABN AMRO to shut grain desk on CBOT trading floor

CHICAGO (Reuters) - Brokerage ABN AMRO will shut its pit trading grains desk on the floor of the Chicago Board of Trade (CBOT) on November 1, the desk’s five members said on Thursday, in one of the clearest signs that the iconic ‘open outcry’ style of trading is drawing to a close.

A trader in the S&P 500 options pit at the Chicago Board of Trade looks at an order board. REUTERS/Frank Polich

The CBOT, the citadel of the global grains trade, has seen business shift from the trading pits where raucous traders in multi-colored jackets execute trades with hand signals to what is considered the more efficient electronic platform.

ABN AMRO’s four phone clerks and one runner, an average sized trading desk, had been a mainstay at the 164-year-old exchange.

But, the overall population at the open-outcry venue began to dwindle with the arrival of financial investors about a decade ago who viewed grains as an alternative asset in their large portfolios.

A veteran trader from a prominent brokerage in Chicago said about 1,000 floor traders, phone clerks and runners worked there about two decades ago. Now, there are about 250.

Sources said the services of four people on ABN AMRO’s livestock desk on the trading floor at the Chicago Mercantile Exchange, which owns the CBOT, will also end on Nov 1.

“A few companies who consider it a cost of doing business keep staff around, but others look at it as a losing proposition and are taking a sharper pencil to their costs and looking for other ways to get by,” an independent CME livestock broker said.

In August, 96 percent of CBOT agricultural futures contracts were traded electronically, according to exchange data, underscoring how the personal relationships fostered by pit traders had given way to quick-hit electronic trades.

Traders said the importance of pit trading took another hit in June when the CME decided that settlement prices would be based on both electronic and pit trading activity -- ending the tradition of basing the prices on open-outcry trades alone.

ABN AMRO’s electronic trading operations will not be affected by the closure of its desks on the Chicago trading floors, a source at the firm said.

Data from the Commodity Futures Trading Commission showed that customer money held by ABN AMRO in segregated accounts totaled $2.4 billion as of July 31 this year, more than double from two years ago.

“We’re closing November first,” one of the desk staffers said, declining to be named. “We were busy about five minutes after the open and about 10 minutes before the close but that was about it. The rest of the day there was no business.”

Spokesmen in Chicago and New York for ABN AMRO Clearing, which is owned by the nationalized Dutch bank ABN AMRO ABNNV.UL, declined to comment.

The ABN AMRO desk staff, who asked not to be named, were looking for jobs but said they were not optimistic there would be any openings on the trading floor.

“I‘m taking a little time off and we’ll see where I go from here,” one staffer said, in his familiar deep green jacket.

“None of us have lined up anything,” said another staffer.

Many of those on the grains team had been with the company when it was called O‘Connor & Co, before it was bought by Fortis Clearing Corp and merged with ABN AMRO.

Edmund and William ‘Billy’ O‘Connor who founded the brokerage that carried their name made their fortune trading grains.

“It was O‘Connor and Company for 55 years, Fortis bought us in 2006 and the name was changed to ABN AMRO in 2009,” an ABN AMRO employee, who asked not to be named said.

A CBOT trader, who declined to be named, said more firms will likely leave the trading floor.

“You are going to see a lot more of it,” he said

“What do you need a desk on the floor for, if you don’t trade the open or the close? The one reason is for insurance, in case something breaks down on the screen (electronic platform).”

Managers, phone clerks and runners from other trading desks did not want to comment on the record about the closing of the ABN AMRO desk.

“It wouldn’t be good for me to comment on another company or another desk, but yes the ABN AMRO desk is closing. We’re still here and have heard nothing,” a source at a competing company said. “As futures pit trade keeps shrinking, there is simply less need for a floor presence, fewer desks on the floor.”

The ABN AMRO grains floor desk is well known among floor traders and news agencies as a reliable source of market information.

“I‘m not so sure the CME is aware of the sociology and the news sharing that takes place on the floor, but everything is going electronically anyway,” a trade source said.

Additional reporting by K.T. Arasu, Mark Weinraub, Julie Ingwersen and Theopolis Waters in Chicago; editing by John Wallace and Bob Burgdorfer

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