With the introduction of financial futures at the International Monetary Market division of the Chicago Mercantile Exchange in 1972, a faster and more complex form of communication was organically developed to speed the exchange of information and transactions. Financial futures are often arbitraged against what’s known as the “cash” or “spot” market but a potentially profitable disconnect between the futures and “cash” prices are extremely brief, often a matter of seconds or less. To capitalize on the rapid opportunity, such time sensitive customer orders were no longer written down and carried to the trading pit by a runner but instead communicated via hand signals. Thus, these hand signals became known as “arbitrage” or “arb” in the form of a verb, and such terminology is continued to be used today.
The expansive growth of futures trading in the 70s and 80s by outside speculators and hedgers also lead to a large increase of the trading floor population and the exchanges responded by moving to larger facilities. As the distances increased between those both within and outside the trading pit, the floor population increased their reliance upon “arb” to communicate. It was also during this period that new signals evolved for complex transactions in and between different contracts, to indicate various market participants, and also for the deve lopment of the options markets.
Like all languages, various dialects and slang evolved in different regions and “arb” is no exception. The basic standards were developed in Chicago but trading floors across Sydney, Singapore, London, Sao Paulo, Montreal, New York, Kansas City, Minneapolis and other cities each invented new signals as necessary. Generally different trading pits at the same exchange used standardized signals but even the CME and CBOT, just blocks apart, diverged into vastly different signals for many things. Although this form of communication was once used across worldwide exchanges, it can always be characterized as Chicago’s Language for the origins and majority of participants.
This project chooses to use those hand signals used on the CME trading floor as the industry default unless otherwise noted under subcategories of other exchanges. No endorsement, affiliation or authorization was given by any of the exchanges, companies or individuals whose attributed hand signals are listed on this website as it is an independent project.