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able to see one another during the period before technology facilitated the rapid rise in electronic trading .
However , when the first peak of the pandemic hit in March last year and all market participants were forced to transition to remote working conditions , Chicago-based derivatives exchange CME Group , alongside other exchanges with open outcry pits , was forced to shut them down . Whether they would re-open was uncertain , with rising concerns around the inefficiency and costs of the open outcry system compared to electronic trading .
It was emotional and nostalgic , but not surprising for many when CME Group confirmed on 5 May it would not re-open the open outcry trading pits following their closure in March 2020 . The exchange said that all open outcry pits would remain closed on a permeant basis , except for the Eurodollar options pit , which it opened in August 2020 .
The development was the first in a series of longterm effects of the pandemic . Many participants are realising the inefficiencies of transitioning back to the office full-time following their highly successful adjustment to working from home . A study by Greenwich Associates in November predicted that a small minority of traders would return to the trading desk , with only 4 % of firms surveyed expecting traders to be in the office every day .
In the case of open outcry trading pits , the pandemic acted as a catalyst to speed up a process of elimination that was already ongoing . The open outcry system has been on a trajectory to extinction since the introduction of electronic trading in the late nineties .
Mike Cavanaugh became a floor trader for CBOT in 1998 and remained there until 2003 . Originally founded in 1848 as an organised grain derivatives exchange , CBOT later became the go-to exchange to trade agricultural products .
“ To see a fully operational open outcry trading floor , a sea of people - it ' s chaos and the first time
“ CME may have laid the groundwork for what becomes a decentralised borderless global financial system . I wouldn ' t be shocked if CME didn ' t exist in two years .”
MIKE CAVANAUGH , MANAGING PARTNER , REGIMENT ALPHA , FORMER TRADER , CHICAGO BOARD OF TRADE
I saw it , I was like , whoa , what is this place ? This is insane ,” he says . “ It was pure , utter chaos . Imagine the most non-politically correct , vile , filthy work environment you could possibly imagine , and then imagine at the same time it ’ s filled with the greatest people you could ever meet . I don ' t know how to better explain it there .”
Mike ’ s first day was nothing short of a baptism of fire , entering the trading pit for the first time on the day that New York-based hedge fund Long Term Capital Management collapsed . The hedge fund was initially successful , generating more than $ 1 billion in investor capital between 1994-1998 with the promise of huge returns from a highly-leveraged arbitrage strategy . The strategies , however ,
58 // TheTRADE // Summer 2021