With Halloween coming up, it’s time to bust out this vintage 1980’s trader print shirt and dress as the scariest thing seen in 2022, the bond vigilante. Accessorizing it with my Resistol hat and holstered Beretta would really complete the look.
James Carville famously said in the 90s:
“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
This is on track to be the worst year for the 10 year Treasury according to the century lookback of data I’ve seen, and it’s the worst year for 60/40 portfolios in almost a century as well. It wasn’t always like this, just two and a half years ago in May 2020, I put out the first 0% and negative rates prints in Fed Funds futures. No wormholes were opened in the process, let alone any stops in the market, but it was one small uptick for a local, one giant leap for market possibilities. The concept of negative USD rates is hard to believe actually traded, especially today when Feds Funds futures broke into the 94 handle earlier today with the possibility of a 5% terminal rate. As a postscript, after trading above 100 for a week and half in May 2020, that April 2021 Fed Funds contract eventually settled 99.93.
I made the first 0% and negative interest rate trade in Fed Funds futures in May 2020
The anti spam upgrades worked so good that I managed to lock myself out of the website for an extended period, lol, but now access has been restored. “Still talkin’” just like the first song off the first cassette I ever bought as a swap meet bootleg copy back in 1988.
One announcement to make is that the Trading Pit Hand Signals book is down to about it’s last 100 copies with most of those just shipped to Amazon. There won’t be a second printing run so this is going to be it for the physical books if you wish to pick up a copy. It is also an excellent choice for what the Japanese refer to as Tsundoku. Thanks to all those who have bought the book and I hope you enjoyed it!
Putting up some (weekly?) content on Instagram is something in consideration @tradingpithistory since there is an enormous amount of memorabilia I’ve collected, including hundreds of historical photos which might be fun to share on there. Not sure if I’ll put the effort into it but kinda feeling the itch to make it happen and IG is the most appropriate place for quick visuals with a little caption, then do longer form content here on the website.
The handsignal gallery on this website got buggy and it’s undetermined if enough resources should be thrown at it to correct it so that might stay down. WordPress has had a lot of various upgrades in the 7+ years since transitioning it from blogger and since this isn’t a commercial website, maintenance has slacked a bit on anything non critical.
Trading keeps me really occupied still, along with family, travel, other side projects, etc… but I’m still very passionate about this and will keep continuing to showcase some history. A couple months ago I passed 20 straight years at a member at CME Group and that was always a benchmark I aspired to as back when I started, as I’d see some old timers with special 20 year member markings on their badges and wanted to get to that point. Although I doubt the membership structure will always remain, I’m trying to chase the legendary Lee Stern‘s run an exchange member which is at 73 years and counting!
S&P 500 futures launch button from first day of trading in 1982 at the Chicago Mercantile Exchange. Also shown are buttons given out to promote more traders to spend 15 minutes trying to trade the contract, buttons promoting the launch of options on the S&P contract and the button from the first day of trading the E-mini S&P 500 contract
The standard sized S&P 500 futures contract will be delisted on Friday, September 17, 2021 and it will close an era for that specific contract which was first listed in 1982. Liquidity has long transitioned over to the E-mini S&P contract, which was launched in 1997, so it’s more of a nostalgic closure than anything that has bearing on market function. Although the contract did launch to some decent volumes, a rival stock index futures contract from the NYFE had the potential to draw liquidity away from the CME’s S&P 500 contract so Merc executives Melamed & Sander requested after launch that established traders from other trading pits spend 15 minutes a day trading in the S&P pit to nurture liquidity.
These pinback buttons were given out only to those on the trading floor for a single day on the launch of a contract, so it can be thought of as a type of ‘rookie card’ for a futures contract, but way more scarce. Pictured in the upper left is the original button that was given out on the day of the S&P 500 trading and was based upon the STP oil logo. The upper middle and right buttons are the ones which were give out to remind traders to spend 15 minutes each day trading the S&P contract. The bottom ‘Pac Man’ buttons are from the launch of S&P 500 options on futures in 1983. For good measure, I also included the launch button from the E-mini S&P contract in 1997.
***I also need to note that there’s been some spam issues in the blog that continue to be addressed. This website doesn’t promote, sell or endorse anything that has to do with anything that can ever make money so if you ever come across something along those lines, it should obviously be considered spam. It’s always been my intention to keep this website purely about old trading pit history and zero to do with my or any current trading.***
This wonderful documentary from ITV was uploaded to youtube earlier in the year and is now making the rounds after I saw it uploaded to the LIFFE floor facebook page. The tv documentary runs 27 minutes and was released in 1986. In particular, the mix of raw floor footage and interviews with a few of those who worked on the LIFFE floor at the time, really makes it worth while to watch and get a feel for the trading floor environment.
All the talk about social distancing or even canceling the Olympics in Tokyo makes me long for some Japanese open outcry trading and in a deep dive on the subject, I actually found that the Japanese exchanges had a long history of using trading floor hand signals. The following videos show how the Japanese traded open outcry at the Tokyo Stock Exchange. To get a closer understanding, I used youtube’s transcript feature and then plugged the Japanese text into google translate along with asking a Japanese friend that I met at the CBOT (one of my first friends from the floor as he was a former yakusa enforcer who ended up at the CBOT, which is a wild story in it’s own right, but both of us knew no one else on the floor starting out, so we hung out together a fair bit and remain friends).
One of the most striking things about the Tokyo Stock Exchange trading floor is how there is zero individuality that stands out with everyone, besides exchange staff in brown suits, all dressed identically in a dark blue or black suit over a white shirt. Of course there is zero racial diversity so everyone is Japanese with dark hair and while there has always been a method to the madness of every trading floor, the approach of the Japanese was certainly unique. (The uniformity of those on the Japanese floor brings to mind the Simpsons episode from 1991 where Homer is accused of being a “free-thinking anarchist” because his white work shirt was accidentally dyed pink and he was the only one at work not wearing a white shirt.)
The first set of videos is the most comprehensive and stems from the late 1980s or early 1990s in the TSE trading floor that opened in 1985. I’d recommend turning on the closed captioning (CC button and then going to Settings (the sprocket looking button next to CC) and then turning the language from Japanese to auto translate into English). The video is split into two, roughly 10 minute clips and the example of specific hand signals straddles both clips. It was good to see that the TSE hand signals had similar shortcuts like drinking a beer to indicate Kirin Beer, signaling a rowboat for NYK shipping lines, mimicking driving a car for Toyota, etc….
For some raw footage from the visitors gallery during the Bubble era, this video shows how full the TSE floor was at it’s peak around 1990 when over two thousand workers were on the floor. Apparently the TSE had a jackets optional dress policy in the summer months so it’s all a sea of white shirts on the trading floor. Also seen is the one and only hand signal robot at 8:02 of the clip.
This next video appears to have been taken towards the last day of what’s referred to as “Gekitaku trading” in 1982. The JPX website refers to this as “group competitive call auction trading” which began in 1900 and I don’t really understand it entirely, but if interested you can read about it starting on page 184 of this linked PDF. Opening and closing of this style of trading is initiated with an exchange official using a wooden clacker, now that’s old school! The second part of the same video shows the closing of the TSE trading floor in 1999 and is rather boring.
Next is a video from around 1960 of the TSE which was made to highlight the postwar recovery. The video isn’t entirely about the TSE so I linked it to begin where the trading floor section starts at 5:16 of the video. A portion of the video explains how hand signals were used on the trading floor with similar examples to the first video of this post. There is a second part to the video without closed captioning offered, but doesn’t deal much with the trading floor and by appearance, mostly the back office and continues on about Japan’s industrialization.
To wrap up this post, the last short video is of the TSE in 1935 and I was surprised to see young women working as clerks on the trading floor because in later clips, it’s an all male environment.
In a separate post sometime, I’ll write a bit more about Japanese commodity exchanges.
I don’t write much about the equities markets, mainly because I don’t participate in them and have a lack of interest. The recent squeeze in GME and other stocks did remind me of the above relic from my collection of the famous Panic of 1901. The trading ticket is from the St. Louis branch of the Central Stock & Grain Exchange of Chicago, which was a famous bucketshop of it’s day, and it represents a lot of similarities of the recent frenzy in stock trading.
A lot of speculative manias come down to what I regard simply as distribution of access, although the current buzzword used is “democratization” of the markets with Robin Hood or similar trading apps. Whether it’s crypto or commission free stock trading, the barrier to entry is nonexistent which can be a good thing or a bad thing but history suggests that for the majority, it’ll be a money losing endeavor to get caught up in.
Bucketshops required little to no minimums, gave easy margin access and weren’t subject to many regulatory requirements either (sound familiar?). To get in on the action just required cash on the barrelhead. Trading apps now have a little more restrictions compared to bucketshops of the 19th century, but have added gamification features that are the envy of any casino operator.
All that said, it’s not surprising that this rare bucketshop relic is from the trading frenzy in 1901 as the panic involved the greatest short squeeze seen up to that point in Northern Pacific railroad stock which sent it up 10x in May of 1901. The Global Financial Data blog has a detailed summary linked here about the squeeze in Northern Pacific and I’d suggest reading it for additional background, particularly how the squeeze was eventually diffused.
The bucketshop trading ticket pictured is for shares of Union Pacific which were caught up in the squeeze for Northern Pacific and as might be expected, the purchase was closed out at a loss a few days later as noted on the back of the card. Trading is an incredibly tough game that people don’t realize when so many others are seemingly making easy money. I had the benefit of learning a lot by osmosis on various trading floors and heard a lot of “sayings” which I didn’t really understand the meaning at the time, but eventually the wisdom was understood. Two of my favorite trading floor sayings to share, “the amateur looks for the greatest reward and the professional looks for the least amount of risk” and “there’s old traders and bold traders, but no old, bold traders.”
Jesse Livermore was probably the most famous bucketshop trader of the same era, even operating from St. Louis briefly, and his fictionalized story is told in Reminisces of a Stock Operator. Livermore’s account is worth reading to hear how he traded during the 1901 panic, did most of things right but still managed to lose all his money and go broke once again. That boom/bust trading cycle continued his entire life until he ended it with suicide in a New York hotel cloakroom. I should also note that many RobinHood traders are probably already familiar with the work of Livermore’s granddaughter.
As for the Central Stock & Grain Exchange of Chicago, it was most famous for it’s battle with the Chicago Board of Trade over market quotations after the CBOT had cut off providing market pricing to bucket shops. I believe that the Central Stock & Grain Exchange of Chicago was the last bucketshop to maintain a quote feed from the CBOT, using legal means that eventually went all the way to the Supreme Court.
I have no idea where this current trading mania leads to although it’s gotten far more bizarre that I could’ve imagined already. During the height of the Robin Hood restrictions on GME, I finished a Sunday lunch in Palo Alto and figured I’d drive by Robin Hood HQ in Menlo Park on the way back to the City just to see if anyone was protesting. As it turned out, I saw one lone protestor outside of Robin Hood’s HQ, a man in his 20s, dressed in a Jesus style biblical shepherd outfit and holding a sign stating “God hates market manipulators.” I didn’t have my phone on me, otherwise I’d post up a photo of the guy.