Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=99855
Story Retrieval Date: 5/26/2013 2:58:19 AM CST
Hamsa Ramesha/Medill Josannah Birman/Medill
Despite the longterm trend toward trading derivatives electronically, the sign language of money still speaks louder than words at the CME Group Inc.
No one knows that better than Colleen Carroll, a floor clerk in the live cattle futures pit. She has developed a budding business in teaching hand signals to newcomers who still want to trade in the traditional open-outcry fashion.
According to the CME’s Web site, the company handles more than one billion futures and options contracts per year worth more than $1000 trillion. In September more than 80 percent of trades were made through CME Globex, the company’s electronic trading platform. Carroll acknowledges that the grwoth of electronic trading is threatening open outcry, which relies on hand signals in the trading pits.
“That gloom and doom cloud is slowly but surely coming over my head again.” Carroll said. “You’re doing well and all of a sudden computers come in and take over your job.”
In the midst of a flurry of hand signals and outbursts of yelling from a rainbow of traders in brightly colored jackets, Carroll said the hand signals are a different language.
“You can’t just come in and learn it overnight,” Carroll said. “You do need a little bit of structure.”
It's the trading of options, which are options on futures contracts, that's driving Carroll's little business. Options trading is conducted both electronically and by open-outcry, but it hasn’t moved as quickly toward electronic trading as futures trading has. The reason, traders say, is that options trading just doesn't translate as well to the screen.
According to Mary Haffenberg, associate director of commodity and equity products at the CME, options traders prefer the floor to complete complicated spread trades. Spreading is the buying and selling two or more related futures or options on futures contracts, with the objective of profiting from a change in the price relationship, Haffenberg said.
Carroll started teaching hand signals to interns and trainees about nine months ago. Initially, the classes were free, but now she charges a flat $100 fee for an unlimited number of classes.
“There is so much demand for people who want to learn,” Carroll said. “I started charging because the economy is so bad and I have to pay my bills, too.”
Carroll has taught about 75 people so far, and the financial crisis has not constrained her business, C. Carol Group. Firms usually pay the fee for their interns and several people are waiting to get permission to start taking the class, Carroll said.
Lee Katznelson started training with futures firm Rosenthal Collins Group LLC two months ago, and is taking Carroll’s class.
“The training, it’s really slow and there is no one who wants to really help you,” Katznelson said. “You have to seek out help for yourself and you have to ask questions to anyone who will look at you.”
While many European and Asian markets trade only electronically, the CME is holding on to its in-your-face culture. This leaves trainees like Katznelson with more to master than how to point-and-click on a computer screen. Katznelson trades hogs but is reluctant to delve in and risk losing large amounts of money during the financial crisis.
“If you’re not trading, you’re not losing money,” Katznelson said.
After the close of trading in the live cattle futures pit Carroll teaches Katznelson to stick up his hand and extend all of his fingers, with his palm facing his body, to buy 50 contracts.
“I’m here to lend a helping hand,” Carroll said.