Flashback Wall Street: Remembering the Glory Days of the NYMEX

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It was a place where cacophony reigned. The level of noise was one you might expect at a sports nymex floor traders, but the key players on the scene weren't athletes scoring home runs or touchdowns.

Rather they were traders—very loud and animated ones. They shouted bids and offers, frantically flashed hand signals to indicate specific trades and tossed cardboard chits into pits on a historic, now-shuttered trading floor: At the end ofthe NYMEX's owner, CME Group, closed nymex floor traders exchange's storied Manhattan open-outcry trading floor in favor of electronic trading, which in recent years had come to account for most of trading volume on nymex floor traders exchange.

The floor's closure marked, as a Wall Street Journal headline put it, the "end of an nymex floor traders. It changed its name to the New York Mercantile Exchange in "to attract a broader range of grocers and merchants," but remained focused on agricultural commodities for about a century, according to the book "Exchange-Traded Derivatives" by Erik Banks.

Those commodities included potatoes, which were at the heart of a scandal that threatened the exchange's survival. At the time, speculators defaulted on 1, contracts for the delivery of 50 million Maine potatoes, resulting in "one of the biggest financial scandals to hit the market in years," the New York Times reported.

Levine, told the newspaper in Even before the potato fiasco, the exchange had a reputation of sorts. In contrast to the more reserved, nymex floor traders traders at the famous New York Stock Exchange just a few blocks away, commodities traders, such as those at the NYMEX, were known as "brawlers," said Richard Sylla, a professor emeritus of the history of financial institutions and markets at the NYU Stern School of Business.

Ina New York Times reporter described a typical sight at the exchange as one where "men scream and shake their arms and hands at each other's faces [and others] dash about as if fleeing invisible nymex floor traders. In the late s and s, excitement at the exchange nymex floor traders less on potatoes and more on energy futures, thanks largely to volatility in oil prices.

The NYMEX's light sweet crude oil contract, in particular, became the most actively traded energy contract in the world after it was introduced inaccording to Banks' book. That innovation extended not just to energy futures, but to metals. For all the changes at the NYMEX, what remained a constant for decades was the commotion in the trading pits. Part of the NYMEX's gritty culture was wrapped up in the old-fashioned way most of its denizens continued to do business, even after technological advances allowed the advent of fully electronic exchanges.

NYMEX traders recorded their trades on paper and special cardboard chits. They shuffled the papers to their own clerks while throwing the cardboard chits into the trading pits, where they were collected by NYMEX staff. The information from the cards was ultimately entered, by hand, into the exchange's computers. Inafter a rival exchange introduced an electronic oil contract, the NYMEX nymex floor traders it would launch electronic trading that would take place at the same time as traditional open-outcry trading.

The newspaper proved correct. In the years that followed, open outcry trading nymex floor traders for oil and other commodities shrank precipitously, both at the NYMEX and nymex floor traders commodities trading platforms. Seven years later, the company announced that it would end futures trading at the NYMEX pits and most of its Chicago pits in nymex floor traders of electronic trading.

Other, lesser known exchanges around the world, too, have seen a similar decline in their open outcry traditions. As a result, he added, "commissions are getting to be very low and the guys running around the floor can't do enough business to justify keeping the floor going. Sylla doesn't rule out the idea. The Egg Came First: It was a system that "the older timers were used to," said Sylla.

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