Twitter Pits: Trading In The 21st Century

Books like Liar’s Poker and movies like Wall St and Changing Places have coloured the popular consciousness when it comes to trading floors. “Trading floor” conjures an image of bustling activity, yelling, wildly gesticulating men in suits with wild eyes. There was a time when the trading floor of the Chicago Board of Trade did resemble the popular image.

The trading floor was a place where people looking to buy and sell corn, gold or bonds could make transactions with one another through a process of raucous and energetic interaction. But today the floor has radically changed. It’s a quiet sedate place with only a few remaining traders in the pit compared to the past throngs. But the market still exists and is in fact more liquid than ever. So where is the liquidity coming from?  

Electronic traders. New technological advances have made it possible to buy and sell in financial markets from the comfort of your living room. Anyone with a computer and Internet access can participate in the commodities markets. Trading in the commodities market is happening at a higher volume than ever before. Through the medium of the internet you have electronic trades between established financial institutions including Goldman Sachs and Morgan Stanley, hedge funds and proprietary traders and private citizens including doctors, students, and housewives.

The internet has transformed the market place. Electronically speaking professional traders are rubbing shoulders with doctors using their cell phones to trade on their breaks, students checking their etrade accounts, retirees trading out of fidelity accounts, the housewife who trades form the account she has set up for her housewives investing club meetings. But the camaraderie and banter that used to be part and parcel of participating in the trading floor has effectively “left the building.” How can people reach out and connect to one another beyond their computer screens to learn how their trading peers think?

Again, internet innovation is the answer. Social media, especially twitter, makes possible communication between traders operating at great distances from one another. Instead of sitting in the pit at the Chicago Board of Trade, any trader can hang out in a virtual pit, a “twitpit.” In the twitpit, electronic traders can interact with one another and can gain the benefits of social interaction when it comes to trading. People are discussing trade ideas, what they are seeing and experiencing, answering questions and participating in lively discussions.

I recently caught up with a successful proprietary trader who has been building notoriety on twitter for his great calls in the treasury and grain futures markets. While a few months when the markets were anticipating the end of QE2, most people were looking for yields to move back up. @dontfademe at the time was on twitter day after telling other traders, fund managers and retail guys they were in fact all incorrect and bonds were getting ready to explode upwards, sending yields even lower. His call was dead on. “I’ve always been a vocal trader, calling out trades I see on the screen, and while a lot of traders don’t like to share their ideas with others, by typing out my thoughts and trading levels on twitter, it reminds me to stay disciplined. Twitter has given me an outlet to share my ideas.”

Today his twitter account receives up to 50 messages a day asking him his opinion on the markets. When reading what other respected traders and fund managers had to say about @dontfademe on twitter (Ilana I can ask other successful traders on twitter to give you a quote on me—guys like @deltastikejj or many others—just let me know) (when you get a second take a look at all the comments i have received this morning alone. This does not include the 20 PMs I have already got as well this morning which only i can see).

When I sat down with @dontfademe he had the following to say:
“Over the last 10years there has been an evolution in trading from the floor to the screen. As a result the community/marketplace has changed. Today most of us are in an office/ “bubble”. A few years a go I was completely isolated as there is no community anymore with the physical Pits volume drying up. Twitter is changing the way people trade and I’m not just about the retail folks out there. There are fund managers, proprietary traders and lots of great sources for real-time news on twitter.

Often times I see breaking economic or geopolitical news hit twitter a good 45 seconds before it’s on TV or other paid subscription services I have via the Internet. Because of twitter I have been able to connect with people all over the world! I met a phenomenal trader from India who has such a unique perspective on the US grain markets. Two years a go this wouldn’t of been possible. Twitter also brings the farming community and traders in a new positive way. Using hashtags such as #farm #harvest11 #grow11 #agriculture #agchat makes it convenient to search for others within the community”.
As technology changes the physical landscape of trading some of the best elements of interacting with others on the trading floor are being reinvented in the universal marketplace of ideas, the Internet.

Nathana O’Brien contributed to this post.

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