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Open outcry

Open outcry is a traditional method of exchange trading in which floor traders in a physical trading pit communicate buy and sell orders for securities, futures, and commodities through verbal shouting and standardized hand signals, facilitating direct, face-to-face price discovery in a competitive auction-like environment.^[1]^[2] This system originated in the crowded commodity markets of 17th-century Europe, evolving as a practical response to the need for audible and visible communication amid high noise and density on early exchange floors.^[3] The practice gained prominence in the 19th century with the establishment of major futures exchanges, such as the Chicago Board of Trade (CBOT) in 1848, where it became the dominant mode for trading agricultural products like corn and grains to hedge against price volatility.^[4]^[5] In open outcry pits, traders—often organized by product type—positioned themselves in tiered rings, using specific gestures such as palm-facing signals to indicate buy or sell directions, finger counts for quantity or price levels, and unique signs like a fist-to-palm for stop orders or a throat-slash for cancellations, allowing rapid execution in chaotic settings.^[2]^[1] Advantages included transparency through open competition, the ability to gauge market sentiment via body language and noise levels, and efficient matching of buyers and sellers without intermediaries, though it demanded physical presence and could be prone to errors or manipulation.^[2]^[1] By the late 20th century, open outcry faced decline due to the rise of electronic trading platforms, which offered faster execution, lower costs, 24-hour access, and automated record-keeping; for instance, the CME Group's Globex system, launched in 1992, began eroding pit trading's dominance.^[1] Major exchanges like the CBOT and New York Mercantile Exchange phased out most open outcry for futures by 2015, with the COVID-19 pandemic shutdowns in 2020 leading to permanent closure of remaining options pits in 2021, and the final delisting of Eurodollar contracts in 2023.^[4]^[6]^[7] This rendered the method fully obsolete in favor of digital systems, with electronic platforms now handling all global exchange volume for these products.^[1]

Fundamentals

Definition and Principles

Open outcry is a traditional method of trading financial instruments, such as futures, options, and commodities, in which traders physically assemble in a designated trading pit or ring on an exchange floor to execute transactions through vocal announcements and hand gestures.^[2] This face-to-face system relies on direct interaction among participants to match buyers and sellers in real time, fostering immediate negotiation and agreement on trade terms.^[8] The core principles of open outcry center on transparency, achieved through public bidding where all offers and acceptances are openly communicated to the assembled traders, ensuring visibility of market activity.^[2] Competitive price discovery emerges from the simultaneous voicing of multiple bids and asks, allowing supply and demand to converge rapidly on equilibrium prices without reliance on centralized order books.^[8] Face-to-face interaction is essential, as trades are finalized only upon verbal or gestural confirmation between parties, promoting trust and accountability in the process.^[9] Central to the system is the concept of "outcry," where traders shout their bids (offers to buy) and asks (offers to sell), including price and quantity details, to solicit responses from the crowd.^[2] This real-time matching of opposing interests determines transaction prices, with basic rules emphasizing price priority—where the best bid or ask takes precedence—over time priority, meaning the clearest and most responsive offer at the superior price secures the trade.^[10]

Trading Floor Organization

The trading floors of open outcry exchanges were designed as expansive, centralized spaces to facilitate direct interaction among participants, with layouts varying by exchange type but emphasizing visibility and efficient movement. In futures exchanges like the Chicago Board of Trade (CBOT), the floor featured a multi-pit structure spanning large areas, such as the 19,000 square feet on the fourth floor of the 1930 CBOT building, allowing for simultaneous trading in multiple commodities.^[11] These pits were typically raised octagonal or circular platforms arranged in an amphitheater style with tiered steps to ensure traders could maintain eye contact and communicate via shouts and hand signals across the group.^[1]^[11] In stock exchanges such as the New York Stock Exchange (NYSE), the layout centered on trading posts—U-shaped desks or booths where specialists managed specific securities, surrounded by open areas for brokers to gather and execute trades.^[1] Organizational features optimized workflow and real-time information flow on these floors. Pits and posts were divided by contract or security type to prevent overlap, with separate areas for distinct commodities at the CBOT, such as dedicated octagonal pits for corn, soybeans, and wheat trading.^[11] Surrounding these core areas were broker booths along the perimeter for order management, clear runner paths for messengers delivering physical orders between pits and external firms, and prominent fixtures like oversized clocks—such as the 13-foot-diameter timepieces at the CBOT—and electronic quote boards displaying live prices to keep all participants synchronized.^[11]^[1] The physical facilities evolved from rudimentary setups to structured environments capable of handling high volumes. In the late 19th century, trading began as informal gatherings in open spaces or basic rooms, but by the 1870s, formalized pits emerged with patented designs featuring raised steps for better visibility, as seen in early CBOT innovations from 1878.^[11] Post-1920s developments, including the CBOT's 1930 Art Deco building, introduced expansive, multi-level floors accommodating hundreds of traders during peak sessions, replacing earlier ad hoc arrangements with permanent, scalable infrastructure.^[11]^[1] To enhance safety and efficiency amid intense activity, floors incorporated barriers around pits to contain crowds, elevated platforms for clerks overlooking the action to record trades accurately, and designated aisles for runner navigation during high-volume periods.^[1] These elements minimized disruptions while supporting the chaotic yet orderly environment of open outcry.^[11]

Trading Mechanics

Order Handling and Execution

In open outcry trading, customer orders primarily consisted of market orders, which were executed at the prevailing price in the pit, and limit orders, which specified a maximum purchase price or minimum sale price. These orders originated from clients and were relayed by futures commission merchants (FCMs) to floor brokers for execution in the trading pit. Outright trades involved single contracts, while spreads combined multiple contracts, such as buying one month and selling another to capitalize on price differentials, often executed as a bundled unit to facilitate hedging or arbitrage strategies.^[9]^[12] The execution sequence began with the arrival of orders at the exchange floor via telephone or teletype from the FCM, where they were time-stamped upon receipt. Floor brokers then entered the designated trading pit and verbally announced bids or offers to the assembled crowd, seeking to match at the best available price through competitive shouting. Upon agreement between parties, the trade was confirmed verbally or via trade tickets exchanged in the pit, with hand signals occasionally used to signal order intentions during the process. This matching prioritized the highest bid or lowest ask, ensuring immediate execution where possible.^[9]^[1] Trade finalization involved clerks or runners recording essential details on trade tickets, including quantity, price, and execution time, which were then submitted to the clearinghouse for matching and verification. The clearinghouse reconciled buyer and seller records daily, handling any discrepancies known as out-trades through automated systems or manual review. Disputes over trade terms or errors were resolved by pit committees or floor conduct committees, which investigated claims and enforced exchange rules to maintain integrity.^[9]^[13] During peak eras in the 1980s, major exchanges like the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT) handled substantial daily volumes in the hundreds of thousands of contracts, with CME executing 78 million contracts and CBOT over 140 million contracts in 1988 alone. Individual trades typically concluded in seconds to minutes, influenced by pit crowd size and market activity, though regulatory standards required time bracketing within one minute for recording accuracy by 1986.^[9]

Roles of Floor Participants

In open outcry trading, floor brokers served as agents responsible for executing client orders on behalf of futures commission merchants or other customers within the designated trading pits.^[14] These individuals, registered with the Commodity Futures Trading Commission (CFTC), navigated the competitive environment of the pits to match buy and sell orders verbally and through signals, ensuring timely execution while adhering to exchange rules on fair trading practices.^[14] Floor brokers earned commissions based on the volume and value of trades handled, incentivizing efficient order fulfillment in the fast-paced auction setting. Locals, also known as floor traders, operated as proprietary traders who used their own capital to buy and sell contracts directly in the pits, primarily to provide liquidity and facilitate smoother order execution for other participants.^[15] These independent members took positions for their personal accounts, often acting as de facto market makers by stepping in to counterbalance order imbalances from brokers.^[16] Among locals, scalpers focused on short-term opportunities, entering and exiting positions within the same trading session to capture small price discrepancies, such as the bid-ask spread, thereby enhancing market depth.^[17] Day traders, a subset of locals, similarly held positions briefly—typically intraday—aiming to profit from minor fluctuations without overnight exposure, contributing to the immediate responsiveness of the trading floor.^[18] Support roles were essential for operational efficiency in the pits, with clerks responsible for recording executed trades, maintaining order books, and ensuring accurate documentation for clearing and settlement processes.^[19] Runners, often junior staff employed by members, physically delivered orders from off-floor locations or phone clerks to brokers in the pits and relayed confirmations back, minimizing delays in the manual workflow.^[19] Pit reporters, functioning as communicators, relayed real-time trade information and market updates from the floor to off-floor clients via telephone or other means, bridging the gap between pit activity and external stakeholders.^[20] Participation in open outcry required exchange membership, typically obtained by purchasing or leasing a "seat" that granted trading privileges and access to the pits, with costs varying based on the exchange and market conditions.^[21] This membership structure ensured that only qualified individuals could engage in floor activities, subject to CFTC registration and exchange oversight for compliance with anti-fraud and fair practice rules.^[15] Dynamics among participants involved close interactions, such as locals arbitraging the spreads between broker buy and sell orders to provide liquidity, which reduced execution costs and supported overall market efficiency as analyzed in studies of scalper behavior.^[22] The trading pits were initially male-dominated, reflecting broader barriers in finance during the mid-20th century, but female participation increased notably by the 1980s as more women gained membership and entered roles like brokers and locals.^[23] For instance, at the Chicago Mercantile Exchange, women traders numbered only a handful in the mid-1980s but grew in visibility, contributing to gradual diversification amid evolving regulatory and cultural shifts.^[23]

Communication Techniques

Hand Signals

Hand signals served as a vital visual supplement to verbal shouting in the noisy open outcry trading pits, enabling traders to communicate buy and sell intentions, prices, quantities, and order types quickly and unambiguously across distances of up to 30-40 yards.^[24] Developed in the mid-19th century to bridge communication gaps between floor traders and support staff amid competitive arbitrage opportunities, these gestures evolved significantly with the introduction of financial futures at the Chicago Mercantile Exchange (CME) in 1972, becoming more complex to handle increased trading volumes and product diversity.^[25] The CME standardized many signals during the 1970s and 1980s as open outcry expanded, establishing a core gestural language that influenced pits worldwide while allowing for some local adaptations. Hand signals often provided visual confirmation for verbal trades, helping resolve disputes over terms.^[25]^[26] Core hand signals focused on essential trade elements, with gestures designed for speed and visibility in chaotic environments. For buying, traders raised both hands with palms facing inward toward the body, signaling a bid; for selling, palms faced outward away from the body to indicate an offer.^[26]^[24] Price indications used a single extended hand: fingers extended upward represented numbers 1 through 5, a sideways hand for 6 through 9, and a closed fist for 0, often combined with facial touches to denote magnitude.^[26] Quantity signals built on this system—for 1 to 9 contracts, the price gesture touched the chin; multiples of 10 touched the forehead; and multiples of 100 involved a closed fist to the forehead after the price signal.^[2]^[24] A stop order was indicated by pressing a fist into the opposite palm, signifying execution at a specific price level.^[2] To cancel an order, a trader drew a hand across the throat.^[24] Arbitrage or switch trades used crossed fingers or wrists to denote inter-market or inter-contract exchanges.^[25] For options, a put was signaled by a downward thumb gesture, while a call used an upward thumb.^[24] Increase or decrease in offers involved upward or downward hand motions, respectively.^[25] Firm identification added another layer, with unique gestures for major brokers like Goldman Sachs (a specific hand shape) or Deutsche Bank (a gesture potentially misinterpreted due to its form), ensuring transparency in who was bidding or offering.^[27] These signals formed the foundation, supplemented by trading cards on the CME floor for precise details.^[24] While the CME's system provided a baseline, variations existed across markets to accommodate product-specific needs, such as differing tick sizes or contract structures. In commodity pits like grains at the Chicago Board of Trade (CBOT), signals emphasized bulk quantities with broader gestures for hundreds of bushels, whereas financial pits for currencies at the CME incorporated subtler arbitrage signals for cross-rate trades, reflecting the faster pace and decimal pricing in forex futures.^[25] For instance, currency traders might use rapid finger counts for pips, contrasting with the more deliberate bushel indications in grains.^[25] Traders typically learned these signals through hands-on experience and apprenticeship on the trading floor, observing and practicing amid live pits to build fluency in the fast-paced environment.^[25] Formal resources, such as catalogs documenting gestures compiled by former CME trader Ryan Carlson, aided later generations in understanding the system's depth.^[25] Despite standardization, misinterpretations remained a risk due to the pits' noise and crowding, potentially leading to execution errors or disputes over trade terms, which underscored the signals' role in upholding integrity through visual confirmation alongside verbal cues.^[28]^[25]

Verbal and Other Methods

In open outcry trading, vocal outcry formed the core of auditory communication, where traders shouted bids, offers, and acceptances to convey orders across the noisy trading pit. Bids were typically announced as offers to buy at a specific price and quantity, such as "Bid 5 at 90," indicating a willingness to purchase five contracts at a price of 90, while offers were phrased as "Sell 20 at 98," signaling an intent to sell twenty contracts at 98. Acceptances followed suit with direct verbal confirmations, ensuring immediate execution of matching orders.^[13] These calls used standardized phrasing, often incorporating fractions for prices (e.g., "95 and a quarter"), to maintain clarity amid the chaos.^[13] Tone and volume played crucial roles in conveying urgency and ensuring audibility; traders raised their voices to project bids and offers "in an audible voice so as to be generally heard in the pit," with louder, more insistent shouting signaling higher priority or time-sensitive orders in competitive environments. Bids and offers must be made openly and in an audible voice so as to be generally heard in the pit, with priority given to customer orders by price and time.^[13] This vocal intensity helped differentiate urgent market moves, such as rapid responses to news events, from routine trading. Supplementary tools augmented verbal methods, including bells or horns to mark market opens and closes—for instance, ringing the closing bell to signal the end of the trading session and prevent further outcry executions.^[29] Pit phones, installed around the trading floor, allowed brokers to relay large or complex orders from off-floor clients verbally into the pit, bridging external communications without disrupting the core outcry process.^[30] Exchange-specific protocol rules governed verbal interactions to promote fairness and order. Etiquette prohibited profane, obscene, or unbusinesslike language, as well as any conduct that confused or distracted other participants, enforcing a professional tone even in high-stress settings.^[13] Bids and offers could not be directed to specific traders and remained open to immediate acceptance unless properly withdrawn.^[13] Verbal conventions in U.S. exchanges primarily used English.^[13] Noise management strategies were essential in larger exchanges like the CME, where positioned shouting—traders standing on tiered steps facing inward—facilitated directed vocal projections to reach intended counterparts without excessive overlap.^[1] These methods, often paired briefly with hand signals for visual confirmation, sustained the fast-paced verbal auction central to open outcry.^[1]

Historical Evolution

Origins and Early Development

The roots of open outcry trading trace back to the 17th century, with the establishment of the Amsterdam Stock Exchange in 1602, where traders communicated through shouting and hand signals in a crowded environment.^[31] This practice evolved into informal commodity markets in European and American ports during the 18th and early 19th centuries, where merchants conducted public negotiations for goods like cotton and grains amid growing transatlantic trade. In London, informal curbstone-style trading emerged in bustling commodity hubs, evolving from street-level dealings outside formal structures to facilitate rapid exchanges in speculative markets. Similarly, in New Orleans, cotton trading flourished informally in the early 1800s as the city became a major export hub, with merchants openly bargaining for cargoes arriving via the Mississippi River, handling volumes that increased sevenfold during the 1820s.^[32]^[33] The global spread of these practices gained structure with early organized exchanges, including the Liverpool cotton market around 1803, where brokers and merchants conducted public deals at Exchange Flags, an open area that supported forward sales of specific cargoes even during disruptions like the War of 1812. In the United States, the New York Stock & Exchange Board adopted a constitution on March 8, 1817, formalizing twice-daily auctions where brokers called out bids and offers for stocks and bonds, laying groundwork for open verbal trading in a regulated setting. These developments marked a transition from ad hoc port negotiations to centralized public forums, emphasizing transparency in price discovery for commodities.^[34]^[35] A pivotal advancement occurred with the founding of the Chicago Board of Trade (CBOT) on April 3, 1848, as the first formalized exchange using open outcry for grain trading, initially as a cash market that quickly incorporated forward "to-arrive" contracts. By 1865, the CBOT introduced standardized futures contracts for wheat, corn, and oats, restricting trades to members and establishing margins to enhance reliability. In the 1870s, trading shifted from private broker negotiations to public pits on the exchange floor, where participants openly shouted bids and offers to match buyers and sellers efficiently. To curb manipulations, the CBOT banned "corners"—schemes to control supply for extortionate prices—as early as October 13, 1868, with these rules strengthening self-regulation by the 1880s amid growing public scrutiny. As pits became crowded, hand signals emerged alongside verbal calls to communicate orders clearly.^[36]^[37]

Growth in Major Exchanges

In the United States, the Chicago Board of Trade (CBOT) experienced significant maturation of its open outcry pit system during the 1920s, as trading expanded beyond grains to include a broader array of commodities and the number of participants grew substantially, solidifying the octagonal pit structure for efficient verbal and gestural auctions.^[38] The Chicago Mercantile Exchange (CME), originally established in 1898 as the Chicago Butter and Egg Board, focused on futures for perishable agricultural products like butter and eggs, employing open outcry methods to facilitate rapid price discovery in a volatile market for time-sensitive goods.^[39] By the 1970s, the CME further evolved by integrating financial futures into its open outcry framework, beginning with the launch of currency futures contracts in 1972, which marked the first major financial derivatives traded on a U.S. exchange and attracted institutional investors to the pits.^[40] Internationally, open outcry gained traction through the establishment of dedicated futures exchanges in the late 19th and 20th centuries. In Japan, commodity trading via open outcry traces back to the 1870s with the formation of early grain and rice exchanges in Tokyo, which standardized futures contracts for agricultural staples amid rapid industrialization and import needs.^[41] Europe saw similar adoption, particularly in commodity pits like those of the London Metal Exchange (LME), founded in 1877, where open outcry enabled global pricing for metals through intense floor auctions that became a model for other European markets. The London International Financial Futures Exchange (LIFFE), launched in 1982, exemplified this expansion by introducing open outcry for interest rate and equity index futures, drawing on the U.K.'s deregulation of currency controls to compete with U.S. hubs.^[42] The peak era of open outcry occurred in the 1980s and 1990s, driven by surging trading volumes amid financial innovation and globalization. For instance, the CBOT handled over 83 million contracts in 1985 alone, reaching approximately 154 million annually by 1990, reflecting the system's capacity to manage massive liquidity in commodities and financials without electronic interference.^[43]^[5] Regulatory advancements bolstered this growth; the creation of the Commodity Futures Trading Commission (CFTC) in 1974 imposed uniform federal oversight, including position limits and reporting standards, which standardized practices across open outcry exchanges and enhanced market integrity.^[36] During this period, roles like local traders proliferated in the pits to provide liquidity and absorb order flow. Technological enhancements complemented rather than supplanted open outcry, with major exchanges introducing computerized quote boards in the 1960s to display real-time prices and aid floor participants in navigating high-volume sessions.^[35] These digital displays, first applied in U.S. markets like Chicago, improved transparency by broadcasting bid-ask data electronically while preserving the core auction dynamics of verbal shouts and hand signals.

Decline and Transition

Drivers of Change

The shift from open outcry to electronic trading was primarily driven by technological advancements that offered superior speed, accessibility, and operational reliability compared to physical trading floors. The introduction of electronic platforms, such as the Chicago Mercantile Exchange's (CME) Globex system in 1992, enabled near-24-hour trading cycles, sub-second order execution, and seamless global participation without the constraints of fixed trading hours or geographic limitations.^[1]^[44] Competitive pressures intensified this transition, as exemplified by the rapid success of the fully electronic Eurex exchange in 1998, which captured significant market share from traditional open outcry venues by providing instantaneous matching and reduced latency.^[44] Economic and efficiency considerations further accelerated the decline of open outcry, as maintaining physical trading pits incurred substantial ongoing costs for real estate, staffing, and infrastructure that electronic systems largely eliminated. Open outcry operations were particularly vulnerable to inefficiencies, including manual order recording prone to human errors and miscommunications in noisy environments, which electronic automation mitigated through automated verification and audit trails.^[1]^[45] In contrast, electronic platforms reduced overall transaction costs by factors of four to seven, allowing exchanges to scale operations with minimal marginal expense per trade.^[45] At its historical peak, open outcry handled millions of contracts daily, but these volumes exposed the system's scalability limits, prompting a reevaluation in favor of digital alternatives.^[44] Evolving market demands also played a pivotal role, as traders increasingly sought flexibility beyond traditional floor access, including after-hours trading, fractional contract sizes, and direct participation for remote institutional and retail users. The rise of off-exchange electronic communication networks (ECNs) fragmented liquidity away from pits, compelling major exchanges to adapt to retain volume from non-floor participants who prioritized screen-based interfaces for their transparency and ease of use.^[46]^[1] Regulatory scrutiny and external shocks compounded these pressures, emphasizing the vulnerabilities of centralized physical venues. Following the 1987 stock market crash, heightened focus on market transparency and intermarket coordination—stemming from concerns over opaque futures trading practices—pushed regulators toward systems that provided clearer auditability, which electronic platforms inherently supported.^[47] The September 11, 2001, attacks further underscored physical security risks, as disruptions to New York trading floors like those of NYMEX and NYBOT highlighted the fragility of open outcry infrastructure, accelerating the deployment of remote electronic backups.^[48] Broader globalization trends favored electronic trading by enabling cross-border integration without the logistical barriers of physical pits.

Key Conversion Milestones

The transition from open outcry to electronic trading began with experimental hybrid systems in the mid-1990s. In 1994, the Chicago Board of Trade (CBOT) launched Project A, its first electronic trading platform, which allowed after-hours order entry and matching alongside traditional open outcry during regular hours, marking an early pilot for concurrent trading models.^[49] Similarly, the London International Financial Futures and Options Exchange (LIFFE) expanded its Automated Pit Trading (APT) system in the late 1990s, with significant volume growth averaging 33% annually from 1990 to 1997, paving the way for its full shift to electronic trading via LIFFE CONNECT by November 2000, when the last open outcry pits closed.^[50] In the United States, the Chicago Mercantile Exchange (CME) advanced the hybrid approach by introducing side-by-side electronic and open outcry trading for Eurodollar futures in 1998, enabling traders to choose between platforms for the world's most liquid short-term interest rate contract.^[51] This move accelerated the coexistence of systems, as electronic volumes began surpassing pit trading for select products. Globally, the launch of Eurex in 1998 represented a pivotal fully electronic exchange, formed by the merger of Germany's DTB and Switzerland's SOFFEX, which operated without any open outcry from inception and quickly captured significant European derivatives volume.^[52] Hybrid phases persisted into the 2000s at exchanges like the New York Mercantile Exchange (NYMEX), where open outcry coexisted with electronic trading on the CME Globex platform following NYMEX's 2008 acquisition by CME Group, allowing floor participation in energy and metals contracts until volumes shifted decisively.^[53] By the early 2010s, declining open outcry volumes—dropping to around 12% of total futures volume by 2009 and further to 1% by 2015—prompted final shutdowns, including ICE Futures U.S. closing its New York open outcry floor for soft commodities like cotton, coffee, and sugar in October 2012 after 142 years.^[54]^[55] The CBOT culminated this era by permanently closing its futures trading pits on July 6, 2015, ending 167 years of open outcry operations since its founding in 1848, as electronic trading had rendered floor activity obsolete for agricultural and other contracts.^[56] NYMEX followed suit, shutting down its open outcry floor entirely on December 30, 2016.^[57] The COVID-19 pandemic accelerated the final phase of the transition. In March 2020, CME Group temporarily closed its remaining open outcry pits due to health concerns. While most were not reopened, the Eurodollar options pit was briefly reactivated in August 2020 with modifications for social distancing. In May 2021, CME announced the permanent closure of all but this pit, citing negligible volumes. The discontinuation of Eurodollar contracts in January 2023, following the phase-out of LIBOR, shifted focus to SOFR options, for which limited open outcry trading continues alongside electronic platforms as of 2025.^[58]^[59]^[60]

Impacts and Legacy

Advantages and Limitations

Open outcry trading offers several advantages rooted in its face-to-face, human-centric nature, particularly in enhancing price discovery and market dynamics. The direct interaction among traders allows for visual cues such as eye contact and facial expressions, which facilitate the assessment of market sentiment and reduce information asymmetry by revealing intentions and urgency in bids and offers.^[2] This human judgment contributes to superior price discovery, as traders can quickly adjust orders based on observed behaviors, leading to more efficient matching of bids and offers in real time.^[61] In volatile markets, open outcry has demonstrated advantages in liquidity provision, with studies showing that floor-based systems provide better price efficiency for shorter maturities during high-volatility periods compared to electronic alternatives.^[62] Local floor traders play a key role in bolstering liquidity by providing immediacy—rapid order execution and the ability to cancel or modify trades in fast-moving conditions—fostering social trust and stability when electronic systems might falter under extreme pressure.^[45] Despite these strengths, open outcry faces significant limitations that hinder its scalability and efficiency in modern markets. Physical constraints limit trading volume and participation to those present on the floor, excluding remote traders and capping scalability as markets grow beyond the capacity of trading pits.^[63] Higher operational costs are a major drawback, including substantial fixed expenses for maintaining trading floors and membership requirements; for instance, the Chicago Board of Trade incurred around US$300,000 annually just for an evening session, alongside broader membership and lease fees that added to the financial burden on participants.^[45] The system is also vulnerable to human error and fatigue, with the noisy, high-pressure environment increasing the risk of out-trades—disputed or erroneous executions—particularly in fast markets, where manual processes lead to inconsistencies not seen in automated systems.^[45] Electronic trading mitigates these issues with lower error rates through precise time-stamping and automated matching, while post-conversion analyses indicate cost savings of at least 50% in transaction fees due to reduced overhead and pit operations.^[45] Comparatively, open outcry excels in building trust and handling nuanced interactions during crises but lags in speed and accessibility; manual execution takes seconds or minutes versus milliseconds in electronic systems, and while it contributed more to price discovery in high-volatility scenarios like those studied in Bund futures markets, electronic platforms generally offer broader liquidity and lower overall costs in stable conditions.^[61] These trade-offs ultimately contributed to the shift toward electronic trading, as evidenced by major exchanges' conversions that prioritized scalability over the interpersonal advantages of open outcry.^[45]

Current Status and Influence

By the mid-2020s, open outcry trading has become exceedingly rare, confined primarily to hybrid systems at a handful of exchanges where it supplements electronic platforms for specific price discovery needs. The London Metal Exchange (LME) maintains its historic "Ring" as Europe's last open-outcry floor, where traders shout bids and offers during five-minute sessions to set official prices for metals like copper and aluminum, supporting physical market participants despite the dominance of electronic trading. Similarly, the Cboe Options Exchange operates a hybrid model with open-outcry pits in Chicago for complex options orders, attracting proprietary trading firms for large institutional executions that benefit from in-person negotiation. These venues represent isolated holdouts, a sharp decline from its peak when it handled the majority of exchange trades.^[64]^[65]^[66]^[67]^[68]^[69] The legacy of open outcry endures in cultural and operational remnants within modern trading environments, fostering a blend of human interaction and technology. At exchanges like Cboe, physical trading floors preserve elements of the outcry tradition, such as verbal negotiations for price improvement on complex orders, which electronic systems sometimes struggle to replicate efficiently. Former open-outcry traders have transferred core skills—such as rapid market reading, risk assessment, and liquidity provision—to electronic proprietary trading desks, where they develop strategies that echo the intuitive decision-making honed in pits. Regulatory frameworks also reflect open outcry's emphasis on transparency and fair access, influencing oversight of alternative trading systems like dark pools to mitigate opacity and ensure equitable execution principles.^[70]^[71]^[72]^[73]^[74] Modern adaptations have extended open outcry's influence beyond physical floors into digital realms, particularly for education and algorithmic design. Virtual simulations recreate pit trading dynamics for training new market participants, allowing them to practice hand signals, verbal bidding, and crowd psychology in controlled electronic environments without real capital risk. High-frequency trading algorithms increasingly incorporate liquidity provision mechanisms inspired by open outcry's market-making role, dynamically adjusting quotes to mimic the continuous two-sided markets created by floor traders, thereby enhancing overall exchange depth.^[75]^[76]^[77] Looking ahead, open outcry's future appears limited to niche applications amid the electronic trading hegemony, with 2025 data indicating sustained minimal activity confined to hybrid options and metals markets. While its persistence in venues like the LME Ring underscores advantages in price discovery for illiquid or physical trades, broader revival seems improbable without disruptive innovations, as global volumes remain overwhelmingly digital.^[78]

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[PDF] Chapter 5 Trading Qualifications and Practices - CME Group
Members shall register with the Exchange all persons whom they wish to employ on the trading floor. Such employees may act as runners, communicators and clerks.
[21]
[PDF] In the Matter of Mark B. Fisher, et al.
For the privilege of trading on the floor of an exchange, floor brokers and floor traders either buy or lease a seat at considerable cost from which they ...
[22]
https://www.jstor.org/stable/2329239
[23]
Closing time for Chicago's trading pits
The company, which merged with the Chicago Board of Trade in 2007, plans to close all but one of its futures pits July 6.
[24]
Hand Signals | Open-Outcry Communication - Northman Family Home
Arb, short for arbitrage, is the system of hand signals used to communicate buy and sell information in an open-outcry trading environment.<|control11|><|separator|>
[25]
Trading Pit History
### Summary of Open Outcry Hand Signals from TradingPitHistory.com
[26]
Trading Floor Hand Signals: The Sign Language of Futures Trading
Trading floor hand signals are used to indicate the trade's quantity or the number of contracts being bought or sold.
[27]
CME Trader Hand Signals - Business Insider
Dec 27, 2013 · Below are the hand signals used by CME traders to identify some of the big Wall Street firms (some of which are no longer with us).
[28]
Futures Trading's Shift from Open Outcry to Digital - EdgeClear
Aug 30, 2024 · While the open outcry system was defined by its human elements and physicality, electronic trading has brought speed, efficiency, and ...Missing: credible | Show results with:credible
[29]
Ending an era, CME Group to shutter most futures pits | Reuters
Feb 4, 2015 · The world's largest futures market operator will shutter almost all of its open-outcry futures pits by July 2, ringing the closing bell on a ...Missing: horns phones
[30]
p113 the Market Taker s Edge Insider Strategies From the Options ...
... pit. Phone clerks were the runners' bosses. The phone clerk for whom I ran ... open outcry. In fact, only a very small percentage of traders have this ...<|control11|><|separator|>
[31]
Curb Trading: What It is, How It Works, Origins - Investopedia
The origins of curb trading trace back to curbstone brokers who were known to conduct trading on the actual curbs of streets in certain financial districts.
[32]
Before the Civil War, New Orleans Was the Center of the U.S. Slave ...
Apr 19, 2021 · Cotton exports from New Orleans increased more than sevenfold in the 1820s. Pouring down the continental funnel of the Mississippi Valley to its ...<|separator|>
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[PDF] The Liverpool Cotton Market: Britain's First Futures Market
May 30, 2017 · The Liverpool cotton market emerged in the early decades of the nineteenth century to become the largest market supplying the.
[34]
The History of NYSE
The New York Stock Exchange traces its origins to the Buttonwood Agreement signed by 24 stockbrokers on May 17, 1792, as a response to the first financial panic ...
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US Futures Trading and Regulation Before the Creation of the CFTC
April 3, 1848 – The Chicago Board of Trade (CBOT) is founded as a cash market for grain. Forward or “to-arrive” contracts begin trading at the CBOT almost ...Missing: outcry | Show results with:outcry
[36]
A History of Futures Trading in the United States – EH.net
Two nineteenth century challenges to futures trading are particularly noteworthy. The first was the so-called Anti-Option movement.Missing: pre- | Show results with:pre-
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Pit Trading: Meaning and Evolution - SuperMoney
Aug 19, 2024 · The 1920s marked a significant period of expansion for pit trading. The commodities being traded expanded beyond grains to include various ...<|separator|>
[38]
Midwest Grain Trade: History of Futures Exchanges - CME Group
After an initial period providing trading in forward contracts, the CBOT introduced standardized futures contracts in 1865. ... Chicago Board of Trade and Chicago ...Chicago Board Of Trade · Chicago Mercantile Exchange · Test Your KnowledgeMissing: outcry | Show results with:outcry<|separator|>
[39]
Open-outcry trading stood no chance, says futures 'father' Melamed
Feb 5, 2015 · Melamed was a key player in the introduction of currency futures in 1972, the first financial futures. When he was chairman of the Chicago ...
[40]
https://www.reuters.com/article/markets/currencies/open-outcry-trading-stood-no-chance-says-futures-father-melamed-idUSKBN0L905S/
[41]
London International Financial Futures and Options Exchange (LIFFE)
Sir Brian Williamson established LIFFE on September 30, 1982 to take advantage of the UK's removal of currency controls in 1979. Originally located in the ...
[42]
CBOT sets yearly volume record - UPI Archives
Jan 3, 1986 · Volume at the Chicago Board of Trade totaled 83847460 contracts in 1985, a record for both the CBOT and the United States futures industry.
[43]
How Leo Melamed Took The CME From Open Outcry To Electronic ...
Jul 24, 2015 · Leo Melamed was the driving force for technology at the CME, said Michael Gorham, Professor of Finance and Director of the Center for ...Missing: change | Show results with:change
[44]
[PDF] Open outcry and electronic trading in futures exchanges
Bids and offers entered into the system are good for only five seconds, which resembles the situation in the trading pit. LIFFE reaffirmed that open outcry ...
[45]
Evolution Of The Marketplace: From Open Outcry To Electronic ...
Aug 15, 2016 · From the mid-19th century to the early 21st century, open outcry markets commenced trading on a large scale and became the backbone of the ...
[46]
Stock Market Crash of 1987 | Federal Reserve History
The mismatched settlement protocols resulted in a virtual standstill in trading after the opening bell on October 20. The Fed's injection of liquidity later ...
[47]
[PDF] March 11, 2002 - Commodity Futures Trading Commission
Mar 11, 2002 · Impact of the Terrorist Attacks ... center and a trading floor equipped with two open-outcry pits. All ...
[48]
[PDF] Introducing contemporaneous open-outcry and e-trading at the ...
Apr 24, 2009 · In 1994, the CBOT introduced its first e-trading platform, Project A. This trading system used an electronic order-entry and order-matching sy-.Missing: hybrid | Show results with:hybrid
[49]
[PDF] Electronic Trading on Futures Exchanges
Although the open outcry method is still the best way to trade highly active contracts on futures ... trading pit, negotiates a price by shouting out the order to.
[50]
London International Financial Futures and Options Exchange
The London International Financial Futures and Options Exchange (LIFFE, pronounced 'life') was a futures exchange based in London.
[51]
https://www.wsj.com/articles/SB911415568218300000
[52]
Eurex: What it is, History, Trading Technology - Investopedia
The Eurex was one of the first exchanges to offer fully electronic trading to its users. Deutsche Börse AG became the sole owner of the Eurex in 2012 when it ...
[53]
CME) and NYMEX Holdings, Inc. (NYSE - SEC.gov
Through a hybrid model of open outcry floor trading and electronic trading on the CME Globex® electronic platform, as well as clearing off-exchange instruments ...
[54]
[PDF] Preliminary Findings Regarding the Market Events of May 6, 2010
May 6, 2010 · volume—while open outcry trading had declined to approximately 12 percent of the combined volume of those exchanges.147 For example, in 2009 ...
[55]
ICE ends 142-year tradition of open outcry trading | Reuters
Oct 20, 2012 · On Friday The IntercontinentalExchange Inc silenced 142 years of floor-based open-outcry trading in the New York soft commodity trading pits, a ...Missing: 1817 | Show results with:1817
[56]
No more 'roar' as famed trading pits come to an end - CNBC
Jul 6, 2015 · On Monday, most futures pits in Chicago and New York are expected to close for good.
[57]
https://www.wsj.com/articles/nymex-trading-pits-shut-down-marking-end-of-an-era-1483030301
[58]
Price discovery in high and low volatility periods: open outcry versus ...
Bund futures contracts are traded in almost an identical design on the London International Financial Futures Exchange (LIFFE) and the Deutsche Terminborse ...<|separator|>
[59]
Open outcry versus electronic trading: Tests of market efficiency on ...
Feb 22, 2018 · When volatility is high, open outcry is superior for shorter maturities and electronic trading for longer maturities.
[60]
Assessing the impact of electronification on sell-side markets
Apr 11, 2024 · The decline of open outcry trading led to a loss of human contact and specialist knowledge, which were crucial in the pits. Success in ...
[61]
The curious survival of London's metals market that time forgot
Apr 9, 2025 · A dwindling number of London's metal traders still conduct business in-person by shouting orders across Europe's last so-called open-outcry trading floor.
[62]
The Ring | London Metal Exchange
Our open-outcry trading floor, the Ring, is central to the process of price discovery. The LME Official Prices are discovered on the trading floor.
[63]
London Metal Exchange commits to trading floor amid electronic push
Oct 9, 2025 · Chief executive Matthew Chamberlain tells FN open-outcry ring has role in supporting electronic trades.
[64]
Prop Firm Prime Trading Enters Chicago S&P 500 Options Pit
Aug 20, 2025 · ... Cboe revamped its open outcry floor in 2022. The growth underscores the enduring need for in-person trading to connect buyers and sellers on ...<|control11|><|separator|>
[65]
CME Group to Close Most Open Outcry Futures Trading in Chicago ...
PRNewswire/ -- As open outcry futures trading has fallen to just one percent of the company's total futures volume, CME Group today announced it will close.Missing: hybrid phases 2000s
[66]
Traders Barking Orders in London Open Outcry Get Reprieve
Jun 23, 2014 · While the LME accounts for more than 80 percent of global metal-futures trading, ring trades are down to about 5 percent of total volume ...
[67]
Cboe U.S. Options | Trade Equity, Index & ETF Options
Access one of the most liquid U.S. options marketplaces and home to SPX® and VIX® index options. Cboe® offers electronic, hybrid, and open outcry trading ... 2025 ...US Options Market Statistics · Benefits of Membership · Strategy-based Margin
[68]
How Cboe's Hybrid Trading Model Bridges Past And Future - Nasdaq
Apr 2, 2024 · The utility of open outcry trading remains significant for certain Cboe customers, particularly for executing larger, more complex orders and ...<|control11|><|separator|>
[69]
From Open Outcry to Electronic Trading: Andy Tan's Journey ...
Tan initiated the transition of his floor team towards electronic trading as early as 2000, amid the Y2K period, by gradually moving some members off the ...Missing: transfer | Show results with:transfer
[70]
Sam Gaer's Open Outcry History Was a Path To Electronic Trading
Jan 31, 2025 · Veteran Trader and Technologist Interviewed for Open Outcry Traders History Project ... skills and navigating the intricacies of the market ...
[71]
Shedding Light on Dark Pools - SEC.gov
Nov 18, 2015 · Today, the Commission takes steps toward shedding much needed light onto dark pools by requiring certain ATSs to be more transparent, and by ...
[72]
Open Outcry Market - SERC (Carleton)
May 24, 2010 · The simulation creates a trading pit atmosphere in which students must buy and sell guided by their reservation prices.
[73]
Business center sees the futures (and derivatives) - UIC today
Apr 7, 2015 · Not long ago, trading involved “open outcry.” Traders down on the ... Software program Xtrader, for instance, allows students to simulate trading ...
[74]
https://www.sec.gov/newsroom/speeches-statements/shedding-light-dark-pools
[75]
Why Are Traders Still Shouting in 2025? | IBKR Podcasts
May 1, 2025 · Open outcry trading allows for price discovery, especially for large institutional orders, and is still used for some deals despite electronic ...