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When I started trading, all futures market orders were executed in a trading pit on the floor of the exchange building. I started out trading the FTSE100 futures market through a discount broker. When I wanted to enter a trade I would call my broker, who was sitting in his office somewhere in the City, he would check my account to make sure I had enough funds, and then phone my order to a phone broker on the floor of LIFFE. The phone broker would write down my order and then phone it through to another phone broker who was situated within shouting distance of the FTSE pit. This broker would write down my order and signal it to his pit broker who would actually execute the order in the pit. As you can imagine, this could take some time, especially when there was a lot of activity. There were multiple potential bottlenecks in this approach and I would often find that my actual fill was some way off the price that was available when I originally entered the order. The trading floor The frustrations of bad fills, inaccurate data and high commissions caused me to go and find out what happened on the floor of the exchange, to see if I could find some alternative to the way I was trading. Through my enquiries, and some chance encounters, I found myself being given a tour of LIFFE by the respected veteran trader David Morgan. When we first walked through the doors that led onto the floor I was met by a barrage of shouting that was soon accompanied by the riotous spectrum of colour and activity that was the hallmark of open outcry trading. As soon as I saw the floor I immediately knew that I had to trade there. What became quickly apparent were the advantages of floor trading and the 8 disadvantages of off-floor trading. As a floor trader, standing in the trading pit where all the orders for that particular market were executed, I had real real-time information I could execute my trades immediately and my transaction costs dropped by over 93% |
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