The Floor

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As you guys probably know by now, I was a floor guy. I wasn’t technically a floor trader, just a clerk, but I was clerk for over a year and knew how to make markets in options, and the only thing keeping me from doing it full time was Le Coast Guard, so maybe you can call me a trader.

Back then there were no computers. Okay, there were computers, but back in the booth. If you were a market maker in the pit, the way you knew your risks/Greeks is if your clerk printed out a report and ran it back to you in the pit. After a few trades, it would get stale, so he would go get you another report. When things were moving fast, you had no idea what your risk was.

Paper tickets. The exchange kept track of everything. You kept the carbon copies as evidence. They were easy to lose.

The clerk would bring you lunch on the floor. The whole place smelled like moldy burritos.

Everyone acted like jackasses all the time. I acted like a jackass when I traded upstairs, but it was 10X that on the floor. My first time ever on a trading floor (the CSCE in 1998) I got an introduction to spurs.

In between all the tomfoolery, some real work got done. What happened was that you could take a big amount of risk and break it down into small amounts of risk. Which is the opposite of what happens today, if you think about it. We aggregate lots of small risk into one big risk. Not a very good system, right?

Lots of people are nostalgic for trading floors, and even though I make fun of the HFT luddites, I am nostalgic, too. Because I don’t like concentrated risk. If a bunch of floor guys get themselves short gamma, and we get the flash crash, it’s not a big deal if we wipe out a few dozen floor guys. It is a huge deal if we wipe out a bank or a big HF. It is worth pointing out that the locals were pretty good at laying off risk with each other, too. Lots of market maker to market maker trades.

Here’s the other reason I miss the floors. I got hired basically because of my SAT scores. And the tough-guy military image. But I walked into an office and said, I don’t know anything about trading, but I’m smart and I’m fast and I’m strong and I can outwork anyone here, and that was enough. Now, you have to know someone, or have the resume of Zeus. You know how hard it is to get a job on Wall Street today? You need to be pretty smart. But we don’t want all smart guys. We want some dumb guys, too. It is getting a little claustrophobic around here.

The floor was also where you got to learn stuff in a controlled environment. You could learn about options and vol and punt around 2 lots and not hurt anybody. And like I said, if you blew yourself up, no consequences outside yourself.

Are we ever going back there? Probably not. The mechanics would be too difficult. The old P. Coast, after all, is now an Equinox gym. I think the Bored of Trade belongs to someone else. Not sure what they’ll do with the Merc.

Maybe a Shake Shack?

 
Best Response

i was on the floor 2010 to 2013, clerked for a year and then i was a market maker....still had delta sheets on me at all times in case our system crashed. our backer wouldnt let you trade unless you knew how to read delta sheets....solid points here though, it was organized chaos and you could actually feel/see when guys were taking heat, sad to see the floor dying a slow death, if it wernt for the eurodllar pit the CME would be closed, same goes for CBOE and SPX pit....

 

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