Chicago pit traders are up in arms against a CME Group plan to use electronic trading to set grain and livestock closing prices, a move they fear will drive another nail in the coffin of open-outcry dealing.
CME Group, already under fire from many traders for its delay in getting money returned to customers after the October bankruptcy of brokerage MF Global, said that next March or April it would begin incorporating deals from its electronic Globex trading platform into final prices.
For many, the change appeared an inevitable reflection of the growth in electronic trade, which now accounts for the vast majority of transactions on both the Chicago Board of Trade, the world's biggest grain exchange, and the Chicago Mercantile Exchange, which offers contracts tied to cattle and hogs.
But to the cadre of pit brokers and dealers who thrive on the final frenetic minute of floor trading used to set the official end-of-day prices, the change was a rallying cry to defend a way of life that is nearly extinct.
"Are we going to sit here and be kicked in the teeth? Or are we going to fight back?" shouted Alan Young, a cattle broker who helped organize a raucous "Occupy the Pits" meeting of about 100 brokers and traders around the cavernous Chicago Board of Trade (CBOT), birthplace of the modern futures markets.
"There will be a snowball effect if this thing goes electronic, and there won't be any more jobs left."
Dealers say the settlement process has helped preserve the floor, even as other open-outcry pits around the world are shuttered in favor of quicker and cheaper electronic trading. Many pit traders hung up their brightly colored jackets after CBOT launched side-by-side electronic and open-outcry trading in 2006.
Julie Holzrichter, a managing director at the CME, told the group that with the majority of trade now being conducted electronically, it is not fair that settlements should be made only on the basis of pit trades.
"We have two venues and we have never pushed our customers one way or the other," she said. "Things are done because they are in the best interest of the exchange," she told the group.
The meeting in the cattle pit was drawing to a close as lawmakers in Springfield, Illinois gave the green light to a measure that would cut CME's annual tax bill by $85 million in a bid to keep the exchange operator from leaving the state and taking its 2,000 jobs with it.
The CME has taken a lot of flack from its floor traders this year, both for its possible move out of Chicago and for the fact that it waited weeks before moving to help former clients of MF Global get their frozen funds back.