An official at the Chicago Mercantile Exchange admitted Thursday that the company’s decision to close its New York open outcry trading floor at the end of the year is a sign of the times, but rejected the assertion that the move is a “nail in the coffin” of pit trading for the commodities and futures industry.
(John McDermott gives a terrific historic overview of the 168 year history of the open outcry era here)
A CME Group spokesperson told Tradestreaming that while the world of finance has largely digitalized, the Chicago trading floors for options and S&P 500 futures remain profitable, and that the traditional form of commodities trading would not disappear completely.
“We do not have a plan or timetable to close the Chicago floor,” the spokesperson said via email. “The majority of markets traded through open outcry in Chicago continue to meet predetermined volume and/or revenue requirements to keep them open. The remaining trading pits generate approximately $160-$170 million annually, or about 5 percent of total company revenue.”
Asked about traditionalist claims that some options trading is “too complicated” to be left to computers, the CME official agreed that electronic options volumes are growing, but added “we still see a number of options on futures trading strategies that are only possible via open outcry at this time.”
Despite CME’s insistence that there is a future for open outcry trading, even company spokespeople appear to believe that the writing is indeed on the wall. While insisting that traditional trading would continue, they also admitted that “our clients prefer to trade NYMEX and COMEX options electronically.” Looking to the future, they also said that “keeping our floors open for the last several years has allowed time to adjust to this overwhelming shift to the screen.”
The derivatives marketplace announced on April 13 that it would close its New York trading floor at year’s end, citing a sharp decline in open outcry options volume on the New York floor, with just 7,500 contracts at present, a 53% drop from 2015 and 0.3 percent of the company’s overall energy and metals trading volumes.
The move is the latest in a trend that began in November of 2000, when the London International Financial Futures Exchange closed its open outcry pits in favor of electronic trading. More recently, CME announced last year the closure of its open outcry futures pits in Chicago and New York, leaving the company with just two remaining trading floors, the Chicago-based options and S&P 500 futures contracts pits.
CME reported 2015 revenue of $3.3 billion and operating income was $2.0 billion. Net income was $1.25 billion and diluted earnings per share were $3.69.