Traders opt for careers outside pits
By Melissa Allison
Tribune Staff Writer
October 8, 2000
Richard Durra is used to working without a net.
After three decades in the Chicago Board of Trade's corn futures pit, he has seen his share of white-knuckle moments and days when he couldn't tell if he would go home rich or poor. His first day on the job in 1973, he lost half his money.
"I never lost the terror of being wiped out," Durra said.
Now that ability to cope with gushing adrenaline and high-stakes risks is paying off in a different venue, as he hangs up his trading jacket to launch a new restaurant.
"You open the door at 5, and at 6 o'clock no one's come in. The fear is not much different from starting commodity trading," said Durra, 61, whose Settimana Café opened two weeks ago.
Durra, of course, is not alone in his decision to leave trading. Chicago is loaded with one-time traders who have quit the pits. Some remodel homes, run banks, sell computers, teach children, write books, market sports memorabilia or defend the accused.
One ex-soybean trader until recently headed the publicly held Anicom Inc. of Rosemont, a high-flying wire and cable company that crashed last year. A refugee from the Merc's currency markets has had a long run as the owner of Chicago's Ivanhoe Theater.
Yet these days, the out-migration is intensifying, as Chicago traders face the prospect of electronic markets replacing the arm-waving and shouting of traditional open-outcry pits.
The idea of those sweaty, hoarse traders in their colorful coats getting pushed aside by a bunch of computer nerds—heretical a decade ago—is on the minds of virtually every pit denizen these days.
And no wonder. Nearly all the open-outcry exchanges outside the U.S. have converted to the screen, and electronic exchanges are booming.
In 1999, the all-electronic Frankfurt exchange capped a meteoric rise to become the world's largest futures mart. The Chicago Board of Trade, formerly No. 1, now has an electronic partnership with the Germans.
Even though Chicago's futures exchanges remain by far the biggest bastion of open-outcry trading, their screens generate nearly 10 percent of volume, and the share is growing fast. Options trading, generally more complex to computerize, appears to be following close behind, as a new all-electronic exchange starts making in-roads.
Nowhere has the future hit home more dramatically than at the Mid-America Commodity Exchange. For generations, the Mid-Am's scaled-down contracts and low cost of entry offered a cheap way to learn the business of pit trading. These days, this Board of Trade-affiliated training ground for the open-outcry crowd is seeing membership seats go for $50. In their heyday, they sold for tens of thousands.
It's enough to jolt even those traders who are in the deepest denial—and it's about time, according to Kevin Gootrad, a 15-year trading veteran who continues to buy and sell 10-year Treasury note futures in the morning but spends his afternoons designing swimsuits.
No question, the obvious job for pit traders displaced by the screen is learning to trade online—and many are pursuing it.
Yet Gootrad and others believe many will fail to make the tricky transition from pit to screen. The rest should think about second careers.
"These guys will be dinosaurs," Gootrad said.
Most, he predicted, will be "working at 7-Eleven, because they can't adapt. It's called Darwinian, survival of the fittest. Get used to it."
The 41-year-old Gootrad, meantime, is feeling pretty smug about his business—called Squidink—and its potential for generating a post-trading livelihood.
While it might seem unlikely, Gootrad moves easily from the Treasury trading floor to designing and selling swimwear for the surf scene.
Putting the sweat-soaked jackets of his morning job behind him, he pieces together bits of fast-drying neoprene—with enough artistry to warrant a two-page spread in a special sportswear issue of Playboy magazine this summer.
Just as traders are apt to let winning transactions run to the upside, Gootrad is running with the Squidink motif by developing a suntan oil of the same name that goes on black but rubs in clear.
"Can't you see it?" he exclaims.
Besides banking on his future in the sand-and-sun scene, Gootrad is hedging by trying to learn screen-trading as well, along with many of his colleagues.
The Chicago Mercantile Exchange has trained 3,000 people since early 1999 to use its electronic trading system.
"It's a snap to learn," said Stephen Levin, a 49-year-old independent broker and trader at the Merc who has worked in the pits for nearly 20 years and began dabbling in electronic trading a couple of years ago. "Everybody makes mistakes. One day I pressed the wrong button and bought more than I wanted."
Indeed, learning to use the system and making good money on it are two different skills.
Computers negate some of the advantages held by typical floor traders. A loud voice and dominating physical presence, so valuable in the pit, count for nothing on the screen, for instance.
Traders lose the advantages that come from gleaning information off the trading floor, too. The moves of big investment houses no longer take place before their eyes. The facial expressions and mood of fellow traders can't be readily gauged. Even the rise and fall of the trading floor din conveys valuable information about the state of the markets that can't be duplicated on the computer.
Or can it?
The Merc is trying to mimic the noise for electronic traders with a new product called Marketsound, which enables computers to sound out electronic buy and sell orders. The din builds as trading becomes more active, just as it does in the pits, but the gimmick remains unproven.
Of course, many older traders see advantages to leaving behind the physical demands of the pits.
"For some people, electronic trading is actually a godsend," said Jim Oliff, vice chairman of the Merc who worked on the floor from 1977 until last year.
Oliff's vocal cords had been battered to the point that his voice was a whisper at the end of each day. If he went on vacation, it took two weeks for him to get his throat back in shape for a full day's work.
For all the talk of long-time traders being ill-equipped for the shift to screen trading, Oliff is one of many pit veterans trying to capitalize on the shift.
He recently opened a trading arcade—a room with dozens of computers for electronic trading. The firm, called LaSalle Street Trading Group, is located in the Merc's building on the Chicago River so traders can move easily between the pits and the screens.
Trading arcades are "trying to recreate the camaraderie and sense of community that you get on the trading floor," Oliff said.
Others are using their trading knowledge to develop hardware and software, including William Noyes, who spent 20 years trading in the Board of Trade's financial pits.
The 46-year-old now hawks software that enables people to trade on multiple exchanges at one screen. The logo for his new company, YesTrader Inc., is painted in windows just above the main entrance to the 152-year-old CBOT—literally a sign of the times.
Naturally, not everyone is interested. Electronic trading has no appeal to restaurateur Durra, for instance, especially compared with serving a particularly rich and delightful tiramisu.
"I would never go electronic," Durra said. "Unless you're down there in the pits to see the confidence and fear and all the emotions going through everybody's mind, how do you know what's going on?" |
