World Grain - May 2015 - 8

FROM THE EDITOR-IN-CHIEF

Pit trading halt as
historic change

s tempting as it may be to call the
closing set for July 2 of the wheat and
other grain futures trading pits operated in Chicago by the CME Group Inc. a sure
sign of the modernization of futures trading,
it is also correct to note the historic, as distinguished from historical, nature of this event.
This is said in the context that "historic" designates an event that has great or lasting importance, while "historical" records an event
that is simply a part of history. Ending the
human interplay that has been an earmark of
dealings in wheat and other grains since the
start of futures trading on exchanges in the
19th century marks the replacement of truly
ic trading conducted by a number of computers. Yes, the latter no longer require the
manpower (as many as 10,000 people were
once involved with futures trading in Chicago pits) or the regulatory systems that once
governed every aspect of activity in trading
real estate exchanges occupied.
No one questions the economics or the
common sense of this historic transformation. After all, the new grain futures exchanges established recently around the
world, notably in London and Paris and also
in China, depended from their start on electronic trading, treating personal contact as an
anachronism. Where operations resembling
the focus often turns to their quaintness, to
the odd manners and protocol governing the
way prices are decided in markets centered
on foreign exchange and precious minerals.
ing has often had to compete with electronic
trading on major markets. That way the obvious cost and many other plusses of electronic
dealings became quickly apparent. The latter's lead over trading pits eventually became
overwhelming. For many exchanges, this has
been a form of voting as to preferred methods
that won the day for electronics.

how different the new is from the old. At one
time, the roar and the action of trading pits,
which are still being used for option trading
due to complexities, served as an important
job in such a visibly exciting industry. At one
time, it might have been possible to identify a
predominance of top industry executives who
was an era when leadership often was drawn
Conducting futures trading in such an
openly observable place as the trading pits,
which are almost always watchable by school
children and interested adults, helps foster the
view that prices for grain are determined in
an open and transparent manner. As mysterious as it may have been to watch a scrum of
the end result produces the right price for the
world's most important food source. It is an
setting standards for grain quality to basic
farm bills where debate in Congress more oftime that view is negative, but mostly the concept of setting prices so openly wins for being
fairly determined.
As pit trading ends after serving the many
needs of the grain-based food industry as
well as humankind for hundreds of years,
it is wise to remember that futures trading
in wheat grew out of the city of Chicago
becoming delivery point for the expanding
prairie wheat crop grown to feed troops and
citizenry during America's Civil War. This
crop is credited as an important force in the
North's victory in that war. In the wake of
victory and the huge subsequent harvest
potential, futures trading on organized exchanges began. It continues the industry's
lifeblood even as historic change occurs in
the process.
Morton I. Sosland
Editor-in-chief

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World Grain - May 2015

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