CME Group shuts down floor trading permanently except for Eurodollar pit

Rick Steves

Except for the Eurodollar options pit, CME Group will shut down all of its Chicago trading floors permanently. This is a historical decision given the importance of trading pits throughout the centuries. Floor trading for agricultural commodities has existed in the Midwest hub since the mid-19th century.

CME Group has announced it will not reopen its physical trading pits that were closed last March due to the outbreak of the COVID-19 pandemic.

The only exception to the permanent closure of physical trading pits is the Eurodollar options pit, which was reopened last August and will remain so, thus allowing these contracts to continue to trade in both open outcry and electronic venues.

The exchange operator will also delist its full-size, floor-based S&P 500 futures and options contracts following the expiration of the September 2021 contracts on September 17, 2021, subject to regulatory review.

Open interest that remains after the delisting will be migrated into the E-mini S&P 500 futures and options contracts that are available electronically on CME Globex.

All individual trading positions will be converted into the corresponding E-mini S&P 500 contracts with the matching expiration date and strike price for options at the current 1:5 ratio.

Everyone talks about the buzz of the trading room Sell-side traders have worked in large, physical trading rooms for decades. A small proportion have stood every day, shoulder-to-shoulder on huge exchange floors.

But in the span of a few weeks in March, the spread of the COVID-19 pandemic has brought us to the current lockdown, compelling banks and broker-dealers to shift most employees to remote work.

CME Group was one of the world’s most popular exchanges performing trading under the open outcry method, consisting of floor traders standing in a trading pit to call out orders, prices, and quantities of a particular commodity or its derivatives.

Different colored jackets were worn by the traders to indicate what firm they were a part of, with complex hand signals being used since the 1970s. Most recently, headsets were also used by the brokers to communicate with the traders.

Trading pits are areas of the floor that are lowered to facilitate communication, somewhat like a miniature amphitheater. The pits can be raised and lowered depending on trading volume.

The seemingly chaotic and confusing system is a tried and true method of accurate and efficient trading, but CME Group is clearly keeping up with the times.

CME Group reopened its trading pit for the Eurodollar options in August 2020 after reconfiguring the pit to meet social distance standards over the next few weeks and implement additional security measures.

Following CME’s move, only the New York Stock Exchange’s trading floor in Manhattan and several options trading floors, including Cboe Global Markets Inc., will remain in the U.S.

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