First Time on the CBOT floor (1989)

The beginning of Pits to Pixels

Growing up in Northwest Indiana, you inevitably new people engaged with The Chicago Board of Trade (CBOT) or the Chicago Mercantile Exchange (CME). You knew clerks, traders, and brokers who worked there. You knew farmers who hedged there. You knew fortunes were made and lost there. I had classmates whose families owned and operated a clearing firm at CME and a classmate whose family had a private plane for flying to all home and away games of their favorite college hoops team. All financed by trading hogs and cattle.

You could say we had a natural edge and particularly when it came to the corn, soybean, and hogs markets. We lived them, or knew well those who did. Where I grew up, Valparaiso, it was rural enough that one area high school had a slaughterhouse within sight, and ear-range, of the ball fields. It was rural enough that to get from one town to another, you inevitably drove through corn fields for at least 15 minutes. There were no “neighboring” towns. We had “neighboring” corn fields as they simply flowed into each other. Towns just eventually emerged after plowing through the fields for some time.

My first visit to the CBOT was during Christmas break of my senior year at Butler University. It was 1989. A buddy from high school had an aunt who managed a grains desk at CBOT. She brought us to the floor and gave a tour. It was, in her words, a slow day. To me, it was close to perfection.

Controlled chaos may capture the environment. There was paper everywhere. Huge amounts of paper scattered about the floor. People were yelling with arms outreached holding what folks today would consider gang related hand signals. The intensity was every bit as real as anything I’d experienced in my athletic career. Watching the wheat traders for ten minutes was like watching a 4th and goal play in the last 2 minutes of a game. The play never stopped though…the energy and intensity held through for what seemed like forever.

I was an economics major at Butler and was sold on the basic laws of supply and demand. That’s all that matters. Desire and ability to produce and distribute vs. the desire to attain and accumulate. The trading pits were everything I’d been studying. This was economics. This was capitalism at its finest. This is where I wanted to be. It was all there. Excitement. Thrill. Joy. Laughter. Fear. Rejection. Dejection. You could see all of that looking at a single cluster of traders in a pit. Every emotion imaginable emanating from a single circle of traders.

Let’s not forget about the jackets. The myriad of different jackets worn by traders. We were told that was to create some order. Uh-huh. Some of it made sense. Exchange employees wore one color. Clerks who worked as trade checkers and errand runners for traders, wore another color. Brokers within the same company wore the same jackets. Traders…the locals…wore whatever kind of jacket they cared to wear. It was a means to differentiate. To be noticed. Let’s not shy away from the fact that traders like to be noticed. We’re loud. We’re proud.

My buddy’s aunt worked for a Wall Street investment bank but she was quick to point out that it was those “madmen” in the wild jackets who were the backbone of the markets. Those loud and colorful traders were the risk-takers. They didn’t own wheat, corn, or soybeans and were speculating on the price of these underlying commodities. They were attempting to make a tick. Buy low and sell higher. Sell high and buy lower. Making a single tick on however many contracts they held was all they were looking for. Her Wall Street customers? They were offsetting risk. They were afraid of a large change in price. They were farmers and commercial firms who owned massive amounts of these commodities. They were offsetting their risk, hedging, by transferring their risk to these individuals. This blew my mind. These anarchists in the pits were taking on the risk of massive corporations like Nabisco, ADM, Cargill, Pillsbury, Budweiser, Kraft and more. It just didn’t add up. How were these “locals” able to help corporations offset risk? A single guy can offset the risk for a huge corporation? C’mon, now. Can’t be. Why were the locals only looking to ride the trade for “a tick”, whatever that is, while the commercials were looking to ride a whole bunch of ticks? How’s that work? I’ll get into that in another blog post.

We left the floor around 10:30 a.m. and were directed to a restaurant across the way. We thought it was a bit odd…late breakfast? Early lunch? It didn’t matter. The tables were packed and the place was rocking. Debauchery didn’t stay on the floor. Beers were flowing and fish sandwiches were on just about every table. The energy was insane. What? This was a restaurant in late morning on a weekday. Didn’t matter. The floor vibe reverberated all around the neighborhood.

The day didn’t end there. We kicked around the city and did those tourist things. Walked the Mag Mile and bought cheesy gold chains that “fell off the truck” from street “merchants”. Went to Gino’s East and wrote on a wall. Went to a Blackhawks game that night. This was still a time when regardless if the game was a sellout, you could slide $10 to an usher outside the Chicago Stadium and get escorted up the service stairwell to the limited view standing-room only area.

I didn’t get back on the floor for a few years. I’ll talk about my second floor experience in a later post. In the meantime, if you are fortunate to have spent time on one of the exchange floors, any of them, I’d love to hear about your experience. Tell me about your first time walking on the floor.