One of the big dogs in the S&P pit was Marty "Buzzy" Schwartz who wrote Pit Bull. Ex-CME Pres Leo Melamed wrote For Crying Out Loud about the transition from the pits to electronic trading.
Anyone ever work as a pit trader?
- Thread starter kmiklas
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Yep, some of them made the transition to the screen and some of them couldn't.
Yes indeed
To quote my old-time CBOT broker:"You're Jewish, right? On the floor we had lots of Jews. Lots of Irish. Irish would drink like fish. Lots of Italians. They'd do coke. But the Jews would do both!"
Robert Morse
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Where it still works this way are the block option trades. On the CME they have a large number of off floor brokers that use ClearPort to cross trades. On the equity/option exchanges, firms like GFI and many other off floor and on floor brokers cross hundreds of thousands of spreads and delta neutral trades w/stock that the retail customer has no access to and are not part of price discovery. Same process as the pit but all on phones and AIM.
I am intensely interested in learning how order queues are established and serviced. Although pit trading may be dead, the question of "who's first in line?" is still very much alive. FIFO queues, Pro-rata, variants... the early bird gets the worm!Why are you asking this pit trading question, are you interested in becoming one...
Did you just watch the movie Trading Places, and feel this is how all the serious, big money is made on Wall St
So, I started wondering, how was this done historically? Back in the day of punch cards, in the pit, when some big news came out that demanded action, who went first? It calls to mind movie scenes of a crowd of traders, in the pit, all screaming, with paper slips in their hands. Did fistfights ever break out on the floor? Regardless, it's hard to believe that who had the strongest elbows, or who yelled the loudest got the privilege of hitting the bid.
Someone had to go first; did they line up? This is a FIFO. How was this order queue established? If "multiple windows" were open, this is modern-day multithreading and parallel processing.
In today's day and age, "who's first in line" is established electronically (arguably by payoffs), via:
a. Colocation. The closest--physically or temporally--to the exchange server, gets their order in first. Exchange colos can cost upwards of $100M--and for good reason; they can rake in profits, being first to get their orders in before a move.
b. Cutting the line. Insiders can monitor the market order queue. If orders start piling up on one side, they can jump in front, take their position, let the other orders move the price, and then collect. It's like printing money.
c. Market maker algos. There's lots of different matching algos (FIFO and variants, Pro-Rata, etc.).
I'm even developing an algorithm to match orders randomly. Being first in line does not necessarily mean that you get matched first. It's basically a lottery system:
Thanks everyone for your responses.
Sincerely,
Keith :^)
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The stories about Tom Baldwin in the bond pit could fill a book. As Spectre said earlier in the thread, the size moved was insane and the biggest players didn't flinch. On the other hand, those on the other side of those trades might freeze and that's where others would pounce.
I think that a lot of the interplay is like high stakes poker, but not everyone has the same stake and that could be a massive psychological edge for someone who had deep resources and could "muscle" the other weaker players.
I think that a lot of the interplay is like high stakes poker, but not everyone has the same stake and that could be a massive psychological edge for someone who had deep resources and could "muscle" the other weaker players.
Damn...I will look for a fight somewhere tonight...LOL