What is the wheat pit like today in the Chicago Board of Trade?

September 20, 2009 6:50 AM

Is the place where the de facto price of grain is set world-wide, the Chicago Board of Trade "wheat pit," still a cacophony of live in-person bidders yelling and making hand signals while wearing platform shoes and bright jackets, or has it become electronic and silent? Or are both types of bidding possible? If it changed, when did it do so and why?
posted by tnygard to work & money (4 comments total)

I believe they still use the open-cry system as well as electronic trading. Does this video (and the Related Videos) help you?
posted by Houstonian at 7:14 AM on September 20

(I meant, "open-outcry".)
posted by Houstonian at 7:15 AM on September 20

Here's some additional information, specific to wheat. It looks like the answer is Yes.
posted by Houstonian at 7:18 AM on September 20

Open Outcry is certainly alive and well at CBOT, and co-exists with Electronic Trading.

But CBOT isn't the only exchange where Open Outcry still exists; The New York Mercantile Exchange, Chicago Mercantile Exchange, Chicago Board of Options Exchange and the London Metals Exchange are just a few examples.

These bifurcated markets are curious, as you tend to see asymmetric information across the two groups of traders. Electronic Trading just can't communicate data as richly as two counterparties facing off against each other, but Electronic Trading arguably can drive far more liquidity than Open Outcry.

While it's well known that Electronic Traders get picked off by pit traders when placing limit orders, Electronic Trading has it's own set of advantages e.g., execution speed, therefore there are participants who tend to favour one over the other depending upon what their motives are.

While there is a lot of literature out there looking at Open Outcry vs. Electronic trading, most of it sits behind pay for firewalls. If you've got access to a University library you won't have any problems seeing the debate.

But I can provide you with a citation by Pirrong (2003), from the University of Houston, who looked at Open Outcry vs Electronic Trading [ .pdf ] .

Hope this helps!
posted by Mutant at 7:22 AM on September 20 [9 favorites]