Tales from the Pits: Finding Commonalities in the Electronic Era
Open-Outcry, Pit Based Traders at the CME
A few weeks ago, a comment on LinkedIn sparked plenty of debate, particularly amongst those of us in the industry of a certain age. In essence, a trader took umbrage over a job advert he had been forwarded, whereby a leading international investment bank was looking to employ “senior traders, with 4-6 years of experience.” The contention was that since broadly no one under the age of 32 has even come close to witnessing a bear market, the description was at best ill-fitting, and at worst laughable. Irrespective of your point of view, this got us thinking – specifically, how much of the skillset that Open-Outcry, Pit based veterans possess, is still pertinent in today’s market?
At QB, we have members of our team who have experience dating back to the heydays of the pits, across Chicago, London and Singapore. The following pertaining to customer care, while intentionally humorous, was very typical of the open outcry environment where they worked. Specifically, visitors to the floor would often ask the question: “When we call to question a fill, what dictates who exactly will take our call, and what steps will then be taken?” The answer to the first part was consistent, in that either a dedicated phone clerk would deal with the issue, or else a Pit trader helping out on the phones would take the call. One of the following scenarios would then unfold:
A) If the dedicated phone clerk took the call: he/she would discuss the issue quietly, apologize, gently put down the phone, check it was dead, and then swear at the client.
– or –
B) If the Pit trader took the call: he/she would discuss the issue at great volume, blame the client, swear at the client, and then slam down the phone.
(Yes – this really happened).
At the risk of appearing overly nostalgic, the time and propensity for error in accurately executing an outcry futures or options order in a fast market following a major announcement or rate move, necessitated a machine likeability on the part of the trader. But that paled in comparison to what the phone brokers – two or even three phones each at a time – had to contend with on the client side. And interestingly, despite the passion and frustration described above, these floor-based relationships between broker and client ran extraordinarily deep, since clients at that time truly understood and appreciated the inherent difficulties of operating in this manner. This was in contrast to some of our subsequent experiences on trading desks around the world, which became more clinical-perhaps more polite-but seldom as deep.
Electronification began in earnest decades ago, but here’s the thing – even with drastically reduced direct trader contact during the trading day (many clients desire zero human interaction in their trading process), the client segment as a whole remains exacting and heavily reliant on their providers to supply color, feedback, opinion, and comprehensive explanation. Paradoxically, in this ever more automated world, there is still a striking similarity between Pit traded derivatives then, and a provider of advanced technology, such as QB now. Both necessitate the deep-rooted relationships that some of us experienced on the trading floors of yesteryear.
In summary, our customer-facing teams at QB have two roles to play: supporting our clients using the advanced solutions that our research and development teams have created but also sincerely caring about our client needs. Our 24 hours per day, 6 days per week client coverage is a crucially important part of what we do, helping our clients gain the most from our service and ensuring their experience of using execution algorithms is never akin to just a faceless black box. Technology may often appear to remove the human element in the name of efficiency, but at QB we continue to fervently believe it remains of critical importance. It is for these reasons – technological excellence and unparalleled client care – that we were delighted to be honored with an industry award last week: Fund Technology Best Broker-Dealer Client Service.
Quantitative Brokers
New York
February 13, 2019