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Re: Electronic Trading



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In a message dated 6/10/99 11:43:16 AM Central Daylight Time, 
MPST@xxxxxxxxxxxxx writes:

<< Not knowing whether or not I'm filled as an order or fill disappears into
 computer abyss is one of the few things which will provoke me to phone rage,
 the response gives blame to Leo, tops, cubs or the connection to the Merc,
 the one I love is "there running orders in by hand"  - what on pony? Pigeon
 post?   Concern over whether your filled wastes energy and time.  Brokers
 who offer electronic order entry systems ought to stick to performance
 criteria and if they foul up then they should be fined or  horsewhipped,
 preferably in that order. >>

**** When there are problems with electronic order routing, then other 
methods of entry to the pit get big increases in order flow.  Specifically 
lots of little orders.  This slows things down greatly. Desk clerks on 
headsets to broker's assistants get some of the order flow.  Some order are 
run into the pit and handed to broker's assistants who operate CUBS2 or EC 
terminals, asking them to remember how to organize and work a paper order 
deck.

**** One aspect of this, is that as firms have deployed technology on the 
floor, people have been replaced by machines.  The desk that once had four 
runners and 4 clerks now has two clerks and one runner.  The point of 
implementing technology is to increase efficiency and reduce costs.  Those 
costs are reduced by eliminating bodies.

**** I can understand why some brokers and traders on the floor are rather 
nervous about electronic trading.  At the CBOT, between the implementation of 
technology and competition from the CBOE for Yellow badges, the population on 
the trading floors of the CBOT is down.  Kind of like a slasher movie, 
brokers and traders wondering who is next to disappear.

**** Being a broker, and offering electronic services, I can't say that I 
appreciate the horsewhipping stuff.  :-)  But, if traders want to forgo the 
reduction in costs part, we can have a bunch of backup runners and broker's 
clerks sitting around waiting for action when the computer systems hiccup.  
:-)  In the old days redundancy was putting in some phone lines from another 
trunk switch, or moving some runners from the other markets not moving, not 
very expensive.  Today it is maintaining expensive computer systems and 
networks.  Quite a difference.

Regards,

John J. Lothian

Disclosure: Future trading involves financial risk, lots of it!

Disclosure: John J. Lothian is  the President of the Electronic Trading 
Division of The Price Futures Group, Inc., an Introducing Broker clearing 
ED&F Man International, Inc.