On a recent morning in the Chicago Board of Trade’s soybean futures pit, the trading action looked like this: One trader hiked up a leg onto a metal railing, stretching his hamstring; another passed time bouncing a green rubber ball; a third yawned.
Activity in Chicago’s 165-year-old open-outcry grain markets has been declining for decades because of computerized trading, which can be executed much faster. But after the CBOT changed the way it reports end-of-day prices in June last year, the share of trading attributed to shout-and-gesture trading fell by about half.
Grain traders, merchants and analysts see an unprecedented threat to the viability of one of the world’s last bastions of shout-and-gesture trading. But floor traders, some from families that have traded in Chicago’s octagonal pits for generations, won’t let open outcry die in the city without a fight.
A group of determined floor traders is suing CME Group, which owns the Board of Trade, and its top executives to reverse the new rules they claim are killing the trading pits. The new rules allow electronic prices to be blended with those in the pits for determining settlement prices, a break with prior practice of relying solely on open outcry to set the key pricing benchmark.
The next hearing in the case, which has run into repeated delays, is set for the end of the month.
Heather Koch, a soy broker and plaintiff in the lawsuit, believes the change will put her out of business. The new procedures have reduced demand for pit trades throughout the day and cut her open-outcry futures business in half, she said.