Why are there still floor exchanges open outcry like NYSE and LME
reading bunch of bloomie articles about the commodity spikes and always see LME open outcry ring. Why do they still exist if algos and bank trading floors are still around?
Stupid question coming from a first year analyst in IB
The NYSE is basically just used as a backdrop for CNBC and for publicity. The LME is a bit more functional as there are a lot of customers and big companies that can send complex orders down to the trading floor. I'd imagine that a lot of the customers enjoy being able to know by their broker on the floor if they got filled or not on the floor in contrast to doing it on the screen. Before COVID came, the only thing that was keeping the floor of the Chicago Board of Trade open was the Euro-Dollar Options pit as about 90% of the volume for that product was done in the pits. I believe about 40% - 60% of the volume for the 10-Year options was also done on the floor.
Why is 90% of volume of eurodollar options done in the pits. This seems like a really inefficient way especially for options.
Well In the Eurodollar they would consitnattly put on much more size for their trades in contrast to other products such as treasures. So if you have something like a 10,000 lot order that goes down into the pit I would think it could be easier for that broker to divide that order up amongst markets makers. Also when you are in the pit you have the face-to-face negation aspect.
Pre covid it was around that range. I'm not sure about it now though
The old fogeys still like to reminise about the good old days. But seriously there are a very select set of asset classes where pit style trading actually is more efficent, read easier to hide movement, than systematized order flow trading.
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Truly its just for show, even going down to the pit its a computer passing to a human to human to a computer.
Exchanges are planning to go full on algo next year by introducing "daily option" contracts...They just cannot help themselves let the machines go to war.
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