Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comAuthor: Dan Brecher|February 16, 2015
As portrayed by Eddie Murphy and Dan Aykroyd in Trading Places, trading pitswere once jam packed with rowdy financial traders wearing colorful jackets shouting commodities prices and flashing hand signals. “Well, this is it, the last bastion of pure capitalism left on earth,” Aykroyd remarks as they enter the pits.
Today, less than 500 traders and clerks work in CME pits. While some traders were angered by the decision to shutter the pits, the news does not come as a complete shock. Most of the traders on the Chicago Mercantile Exchange and New York Mercantile Exchanges already work remotely using computers, at least part of the time. According to CME, open-outcry volumes have dropped 75 percent since 2008 and now comprise just one percent of its futures volume.
Floor traders aren’t the only positions at risk. As automated trading by computer algorithms becomes more sophisticated and the pace of trading continues to escalate, computers are expected to replace a large segment of financial services workers over the next ten years. In many respects, humans are simply too slow to compete with technology when it comes to global markets that operate around the clock.
Of course, electronic trading is not without risk. In the “Flash Crash” of May 6, 2010, the U.S. equity market lost $800 billion in a matter of five minutes, although it was largely able to recover in 30 minutes. More recently, Facebook Inc.’s initial public offering on the Nasdaq Stock Market was hampered by software glitches. Should robot trading become the new normal, our financial regulations will also need to be updated.
Counsel
212-286-0747 dbrecher@sh-law.comAs portrayed by Eddie Murphy and Dan Aykroyd in Trading Places, trading pitswere once jam packed with rowdy financial traders wearing colorful jackets shouting commodities prices and flashing hand signals. “Well, this is it, the last bastion of pure capitalism left on earth,” Aykroyd remarks as they enter the pits.
Today, less than 500 traders and clerks work in CME pits. While some traders were angered by the decision to shutter the pits, the news does not come as a complete shock. Most of the traders on the Chicago Mercantile Exchange and New York Mercantile Exchanges already work remotely using computers, at least part of the time. According to CME, open-outcry volumes have dropped 75 percent since 2008 and now comprise just one percent of its futures volume.
Floor traders aren’t the only positions at risk. As automated trading by computer algorithms becomes more sophisticated and the pace of trading continues to escalate, computers are expected to replace a large segment of financial services workers over the next ten years. In many respects, humans are simply too slow to compete with technology when it comes to global markets that operate around the clock.
Of course, electronic trading is not without risk. In the “Flash Crash” of May 6, 2010, the U.S. equity market lost $800 billion in a matter of five minutes, although it was largely able to recover in 30 minutes. More recently, Facebook Inc.’s initial public offering on the Nasdaq Stock Market was hampered by software glitches. Should robot trading become the new normal, our financial regulations will also need to be updated.
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