There's a heated debate about the value of open outcry vs. electronic trading, with members on both sides of the issue claiming often — and loudly — that their view is the right one for investors and the U.S. financial system.
No, it's not the New York Stock Exchange. It's the Chicago Board of Trade, circa the mid-1990s.
At that time, some of the CBOT's management wanted to move forward with electronic trading but many members, sensing the possible end to their livelihoods, vowed a fight to the finish. Nevertheless, the exchange gradually introduced more electronic trading features, reaching the point that today, fully 80% of the CBOT's financial futures are traded electronically.
The CBOT's path to blending open-outcry and electronic trading might hold some lessons for the New York Stock Exchange and the traders who do business there, particularly with the current turmoil over specialist trading firms now facing the Big Board.
"We don't really have a specialist system," said Bob Ray, senior vice president of business development at the CBOT. "Everyone who's a member, a customer or market maker has equal access to every bid and offer."
At the NYSE, specialists are responsible for bringing buyers and sellers together, providing liquidity and improving prices. Several are under investigation by the exchange and the Securities and Exchange Commission for allegedly stepping between buyers and sellers unnecessarily as well as trading for their own accounts before facilitating customer orders.