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Technology News - updated 1:58 PM ET Oct 21
Saturday October 21 12:51 PM ET
Technology Threatens Trading Tradition's Survival
By Meredith Grossman
CHICAGO (Reuters) - John Fyfe realized a while ago that he was an
endangered species.
As a bond futures broker at the Chicago Board of Trade, Fyfe knew it
was only a matter of time before a more cost-efficient, electronic
trading platform would make floor brokers at the CBOT extinct.
``Look at this sea of people,'' Fyfe said, pointing at the crowd of
traders, albeit dwindling, standing in and around the trading pits in
brightly colored jackets. ``Virtually everybody in this room can be
eliminated by electronics.''
Fyfe, 54, retired from Commerz Futures at the end of September after
22 years on the bond floor at the CBOT. He took with him memories of
the adrenaline rush that used to reverberate through the pits once
upon a time. And he took with him a touch of sadness as he began to
watch brokerage firms, one by one, consolidate trading desks, trim
floor staffs and shift strategies away from open outcry trading.
``This bond pit for many years had some of the greatest traders in
the world,'' Fyfe said. ``Most of them are gone now.''
They, like Fyfe, have gone to pursue better opportunities, to embrace
the technological revolution instead of fall victim to it, or simply
to retire.
Some are not so lucky, however. Too young to retire, they have an
arcane set of skills that may not be applicable to other jobs in the
financial services industry, if anywhere.
``There are a lot of people down here that are trained for a highly
specific and peculiar business,'' Fyfe said. ``It's a really odd
ability that's not necessarily transferable.''
Internet Lures Traders With Golden Opportunity
Patrick Dillon's epiphany came in the form of a 1992 Time magazine
article.
The story about the potential impact of the Internet on business made
the independent bond options broker at the Chicago Board of Trade
realize that technology would forever alter the landscape of the
futures industry.
``When I read that article, I had chills going down my spine because
I knew it was going to change. I said to myself, 'I will one day be
out of a job at the CBOT because of electronic trading,''' Dillon,
36, said.
So Dillon started laying the groundwork for what would become his new
career path. And in March, he left the bond options pit to focus full-
time on the Web site he created, BossOnline.com. The Internet company
is the online arm of Business Office Supply Solutions, owned by
Dillon's father, Thomas Dillon.
``I was thrilled to get out of there,'' said Dillon, who worked on
the bond floor for 15 years. ``Toward the end of my career down
there, business had really gotten slow.''
The Trading Floors Are Not What They Used To Be
Marty Minzer watched days pass at his firm's bond futures desk at the
CBOT without one order being filled. Without one phone ringing. With
his colleagues merely counting down the minutes to the closing bell.
``People are hanging on for dear life because they don't have
anywhere to go,'' said Minzer, 45, who resigned from Aubrey G.
Lanston at the end of September. ``The old dinosaur, the old-
fashioned trader who has been there for his whole life -- I think
that's coming to an end.''
Minzer took a job as a clerk for Heinold Commodities in 1975 because
he wanted a six-month break from his studies at the University of
Illinois at Chicago. The market's limited hours gave him time to
teach tennis lessons after work.
Those six months turned into 25 years as Minzer worked his way up
from a clerk to an independent broker. He eventually moved to Lanston
12 years ago as one of the founding brokers of the firm's financial
futures floor operation.
``A lot of these guys are having a hard time accepting it, but they
have to realize (electronic trading) is the wave of the future,'' he
said. ``You have a new generation of traders that were probably born
with computers in their hands.''
Dillon believes the shift to electronic trading will benefit the
exchange, not to mention depressed seat prices at the CBOT. A full
CBOT membership sold for $365,000 in late September, down from
$857,500 at its peak in May 1997.
``I would put my money on electronic trading,'' said Dillon, who
still owns his seat and leases it out. ``I think those seats are
going to be worth a fortune one day.''
It's Time To Move On
In the meantime, an era is slowly coming to an end. The jovial,
fraternity-like atmosphere on the bond floor has been tamed by the
realization that participants are leaving the floor, packing their
bags, and preparing for the next chapter.
Fyfe said he considered entering the consulting business, but decided
instead to spend time developing successful trading schemes.
``(One firm) tells you to hit the bricks at 50, and (another) retires
their people at 55,'' Fyfe said. ``At my age, no one's going to be
hiring me, so I'm just going to do something on my own.''
Minzer sold his house in a suburb of Chicago to make his vacation
home in Anthem, Arizona, his permanent residence. He has no plans to
work full-time anytime soon, he said, but he hopes to teach tennis
lessons again to keep busy.
For now, though, he is enjoying the desert scenery after working in a
room with no windows for so many years.
``I take out a lounge chair at night. I look at the moon and the
stars, and I hear the coyotes howling,'' Minzer said. ``And I feel
like I just won the lottery.''
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