It seems hard to imagine now, when the few remaining exchange floors in the world tend to double as TV studios. But way back in 1990, the idea of broadcasting live from the middle of the action was downright radical.
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The trading floor of the Chicago Mercantile Exchange is shown in early 1997 in Chicago.
The trading floor was where the action was, though, especially in Chicago — home of the Chicago Board of Trade, the busiest futures market in the world. The screaming traders with their wildly colored jackets and crazy hand signals, a system aptly named "open outcry," were nothing if not great television. So when we were setting up our new CNBC bureau there, we knew we needed a broadcast position on the floor.
No way, we were told.
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Those frenzied open outcry traders were making multi-million dollar, split-second decisions. The tiniest distraction, say from a TV light turning on, could cause entire fortunes to be lost in an instant.
What followed was a months-long back and forth that would make the most seasoned nuclear arms negotiator gasp.
We ultimately came up with an elaborate setup of shades and baffles that rendered the lights invisible to the traders, but allowed me to face the camera with the pits visible behind me. A triumph of ingenuity and resourcefulness, we thought.
After the market closed one day, we demonstrated our proposed setup for the leadership of the exchange. They looked, muttered among themselves, and looked some more. Finally, they approved — but with one last condition: the lighting must be on a dimmer switch, brought up slowly before each broadcast so as not to startle anyone who somehow managed to catch a glimpse. Agreed.
The new system would quickly come in handy.
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On January 17, 1991, at 5:38pm Chicago time, Operation Desert Storm began in Iraq. This was well before the age of global, computerized trading, so the only major financial market in the world open at that moment was the nighttime Treasury Bond session at the Chicago Board of Trade. We showed the action live on CNBC as frenzied traders rushed onto the trading floor behind me and began wildly bidding up and down the price of U.S. debt with the start of the war.
The announcement this week by the CME Group that by July it will shut down nearly all its trading floors, relying instead on computerized trading, unleashes a flood of memories of the trading pits I covered for CNBC for nearly a decade.
One of those memories is an actual flood. In perhaps the strangest disaster in Chicago history, a system of underground freight tunnels became inundated with river water after a construction mishap in 1992, shutting off power for days to the central business district—including the Board of Trade and the Chicago Mercantile Exchange—and showing once and for all how vital to the worldwide financial system the "price discovery" in the pits had become.
Normally, the trading floor was a breathtaking beehive of activity, with wall-to-wall people, mostly men, standing shoulder-to-shoulder—sometimes even closer—betting with each other on everything from the direction of global interest rates to the price of butter. It was such a spectacle that Ferris Bueller swung by the Chicago Merc with his friends to watch the action on his "Day Off."
Especially on busy days, you could stand above the trading floor and literally watch the markets move. Bonds are up over here. Dow futures are down over there. The action drifted from one pit to the other. You didn't need to look at the giant scoreboards on the walls; just watch the traders and their body language. For a young financial reporter without much of a head for numbers, there was no better way to learn how markets interact.
Futures trading was brutal. The younger traders tended to work in the financial pits, particularly the sprawling 30-year Treasury Bond pit. As they got older, they moved to the agricultural pits—corn, soybeans, livestock—less demanding physically, but finesse and trading smarts were even more essential here.
The end of floor trading means the end of the ideal second career for pro athletes. There were lots of them trading in Chicago, and we once did a story about how their talents on the field—athleticism, quickness, vision—translated to the trading floor.
As a result, I got to meet a childhood hero—former Cubs second baseman Glenn Beckert, who had a long and successful post-baseball run as an independent trader at the CBOT. Former Chicago Bears fullback Matt Suhey, who used to open giant holes in the defense for Walter "Sweetness" Payton to run through, was tearing things up in the soybean meal pit.
But along with the heroes, there were villains.
As we set up shop in Chicago, a major illegal trading scandal was unfolding. The FBI had stationed undercover agents in the Chicago pits posing as traders. In the end, 35 people were convicted of trying to rig the markets. Turned out the 150-year-old system of open outcry trading—with many records still kept using pencil and paper—was prone to abuse.
Some had already been thinking that there must be a better way to trade, so the scandal further fueled the calls for automation. But the exchanges fought it tooth and nail. They were still owned by their members after all, and the value of a seat depended on the exclusive right to trade on the exchange floor.
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So rather than embrace the future, they bulked up. They raced to come up with new products. Russian ruble futures. Hurricane futures. Anything to drum up interest.
Then in 1997, CBOT Chairman Patrick Arbor raised the stakes as high as they would go. The Board of Trade dedicated an enormous new trading floor. It was the largest floor in the world, the exchange boasted; 60,000 square feet, enough to hold a 747. It was Arbor's baby, so members nicknamed it the Arbordome or the Arboretum. Traders had more room to play, sometimes for the cameras, which is how the Arbordome became the site of my first and only viral video (view with caution—adult content), more than one million views and counting.
Other than that, the new floor never lived up to the hype as the electronic revolution grew and the floor brokers left. The CBOT and the archrival Merc could no longer survive on their own, and in 2007 they merged to form the CME Group, a name as devoid of charm as trading on a computer screen is.
It's hard to mourn the end of open outcry. The system served the markets well for a century and a half, and was an essential laboratory for the electronic systems most markets run on today. Plus, it did make good television, just as we thought.
But now it's time to move on. This is progress. It's just quieter, and a whole lot less colorful.
