can you expand on this and how pit traders struggled?
Pit trading was a distinct activity from trading upstairs. The tools and edges of the pit trader were peculiar to the pit. Take them out of that environment and put them in front of a computer screen,and it is no different for them than it has been for any of us: It is starting a new skill from scratch.
https://www.ft.com/content/4d221b22-3dfb-11e6-8716-a4a71e8140b0 (I added the emphasis below to highlight what I think is most relevant).
The traders and brokers jostling on the floor did meld into a kind of machine for price discovery.
“It was like one giant computer, where each moment everybody was saying what their bids and offers and quantities would be,” says Henry Jarecki, former board member of the Commodity Exchange, acquired by Nymex.
But the human computer had limitations, notably that
it gave occupants a first look at shifts in market flow. “You’re in a situation where your benefit is seeing things that the world at large can’t see,” says Dr Jarecki, who is also a psychiatrist.
The futures pits dried up first. After years of resistance, Nymex adopted CME’s Globex system and allowed electronic futures to trade simultaneously with the pits in September 2006.
The shift was swift and severe. Electronics rose from 17 per cent to 70 per cent of Nymex volumes by June 2007. Total volumes also soared, with the West Texas Intermediate crude benchmark doubling between 2005 and 2007.
Some veterans were bewildered. On the floor, a trader might know which broker did business for a big bank or aggressive hedge fund and could buy on signs that a broker was in the market. “On a screen, you don’t know who’s on the other side — or if it’s a person at all,” says Mr Ardizzone, who now runs an electronic trading group.
Craig Weinstein was trading heating oil and crude in a combination known as a crack spread (a refinery’s profit margin from “cracking” crude oil into distinct fuels) when the computers took charge. In his best years he was earning $900,000 and owned a house in suburban New Jersey, a Porsche and two Harley-Davidsons.
“No one ever told you this market was going to end,” Mr Weinstein says. “All of a sudden it was lose, lose, lose. I would lose a thousand, two thousand, three thousand. The first month I lost 30 grand I was like, OK, I’m losing money, this is not working any more. I just stopped.”
