Over the years, I have had the opportunity to go on the floor of four major U.S. exchanges – the NYSE, the Chicago Mercantile Exchange, the Chicago Board of Trade, and the Chicago Board Options Exchange. The floors are closed to the general public; even visitors galleries were closed after September 11, 2001. It’s a big deal to receive an invitation for a tour, and should you ever be offered, accept.
These tours were all similar: ladies had to wear skirts; gentlemen had to wear jackets and ties; paper was everywhere; and the noise and activity was just insane. Also, the exchanges were operated much like private clubs. In 1995, my tour of the New York Stock Exchange concluded with the broker buying me a drink in the now-closed Stock Exchange Luncheon Club.
Even in 2007, when I visited the floor of the Chicago Mercantile Exchange and most trading was done electronically, there was a lot of activity.
Last week, I had an appointment at the Chicago Board Options Exchange as part of my research for an upcoming book, and I was offered a tour. The last time I toured the CBOE was probably in 1988. I did not have approval to take photos, but this is what it’s now like:
- It’s very quiet, and there is very little paper.
- There is still some open outcry pit trading, in the VIX option on market volatility and the SPX option on the S&P 500. I was told that open outcry causes less market disruption when contracts trade in very high volumes.
- Along the same lines, the market makers in other options work from computer terminals in other pits, and they will do an open outcry trade on occasion. Many institutions have found that the execution on very large orders is better via open outcry, especially when considering the effect on the underlying.
- Almost all trading is electronic, though, and so large sections of the floor are dim. Apparently, unused equipment can’t be dismantled without risking the integrity of connections in use.
- There is no real dress code. A few traders still had cotton jackets, but it seemed as though many market-making firms moved to matching golf shirts instead of matching jackets.
So there you go! What do you want to know about options trading? Let me know in the comments or on Twitter (@annielogue).