To survive in the trading pit, all you needed was an ability to think fast under pressure, shout loudly and do rapid mental arithmetic. But in a world where successful traders are under 30, robots are taking over and anyone who survives needs to be able to code, there’s a generation of traders from the Chicago Board of Trade who have been left on the scrapheap.
Steve Anichini traded treasury bond futures in the pits at the Chicago Board of Trade from 1982 to 2001, but he now owns a Culver’s, a high-quality fast food franchise restaurant, in Lake Zurich, Illinois, a suburb of Chicago.
“I could have gone electronic, but I was a big people person,” he said. “I am not one of those guys to sit in front of a computer. 99% of the guys in the pits I was in couldn’t sit still for a second.”
“It was quite a ride,” he adds. Anichini started as a clerk and then worked up to become a trader with his own brokerage group working for clients like Deutsche Bank and JPMorgan, filling thousands of contracts a day. Then near the end of 1998 the London Futures Exchange went fully electronic and Anichini started thinking of ways out.
He chose to go into the restaurant business. He went through the McDonald’s training and qualified to apply to run one of their restaurants, but he decided the company was too corporate for him. Instead, he chose Culver’s where he went through a 16-week training program for the 31-year old family run business.
“The key to this whole story from bonds to this restaurant is that whether it was dealing with huge amounts of money or a $5 ButterBurger, I treated my customers the same; I always put them over me.”
Jody Michael traded currency options in the pits, and now runs Jody Michael Associates, which helps former traders find new careers. Most traders tend to resist the lure of corporate life and go out on their own, she says.
“They are freewheeling, they are used to freedom and they love it, which is why a lot go on to be entrepreneurs. They love to make decisions, take on risk and gain reward from their ability to do so,” she says.
Michael knows the feeling. When she saw that the trading floors were going to get wiped out by electronic trading, she quit to go to graduate school at the University of Chicago for a degree in social work and qualification as a psychotherapist.
Her trader colleagues laughed at her when they learned her plan and were taking over and under bets as she walked off the trading floor on how long it would take her to come back.
“I told them they were going to spend money to come and see me, which was so prophetic,” she says.
Contrary to what a lot of recruiters think, she said, trading has transferable skills.
“Traders can synthesize quickly, make decisions fast and are off the charts in their ability to manage stress and think on their feet,” she adds.
Making the transition from a floor trader in Chicago to a new line of work hasn’t always been easy, but many former traders have moved on to a wide range of careers, from entrepreneurs to social workers and even university professors.
The biggest adjustments are financial and social. One trader recalled monthly paydays where a broker could get a check for $120,000 from Goldman Sachs and $90,000 from Drexel.
Chicago, which once had about 10,000 floor traders, the largest concentration in the world, now has just a handful remaining, trading options on futures and S&P futures.
Some former floor traders have successfully transitioned to computerized trading, which has been easier than it was 10 to 15 years ago when floor trading was based on paper slips. More recently, most had been working on tablets that often had trading programs running in the background, said Dale Rosenthal, an assistant professor of finance the University of Illinois Chicago.
“A lot of people in the pits are decently knowledgeable about technology. If you couldn’t use technology you would have had a hard time before now.” Rosenthal traded stock and equity index futures at Morgan Stanley just as it was forming the first algorithmic trading group.
“When I started maybe 5% of the trades were electronic, and by the time I left to go to graduate school, it was 98 or 99%.”
Beyond the money, many former traders miss the excitement of the pits, said Anichini.
“Just the feel, the emotional high you got from trading — a lot of guys just can’t let go of that. You can’t duplicate it in the outside world, the high of always being on edge because you have the chance to make or lose huge every second.”
He was off to have dinner with a friend, a former floor trader who has moved upstairs.
“He still goes in, but he is passing time in a sense. He is probably making less money because he is taking less risk. The risk-reward isn’t there like it used to be when we were in the pits,” he says.
Steve Skrine is another trader who moved into restaurants — Skrine Chops, although in his case it wasn’t an abrupt change — during his 22 years at the Board of Trade he had sold his pork chops at work and prepared them some evenings at bars around town. On Fridays during the summer he would sell 400 to 500 chops to traders heading off to their summer homes for the weekend.
He traded 30-year treasuries and at one point employed 12 traders but he decided to leave as outside competition from Eurex and ICE were hurting the floor, driving out locals which made trading harder and earnings lower. Moving to electronic didn’t interest him.
“I always traded open outcry,” he say.
So he turned his sideline into a full-time business with Skrine Chops downtown, next to the Board of Trade, and in Forest Park, a suburb.
Skrine is also a woodworker and specializes in using reclaimed wood to make furniture and most of the furnishings in his restaurant. He had just returned from five-days in Wisconsin where he was taking down a barn to reclaim the wood. He’ll pay a farmer $1,000 to $2,000, while the Amish won’t pay anything, he said.
“I take some friends along, they like doing it and I make some money.” His restaurants showcase the products he makes from reclaimed wood and he gets more orders.
He made the decision to leave after a volatile day when he felt the market was completely out of his hands. Down $300,000 at one point when the bond dropped 3 points, he came out ahead by $100,000 when the CPI was revised, but that was enough.
Brad Jelinek started trading at ITG in Chicago fresh out of university and stayed until the firm closed down four or five months ago. Now he is trading from home and pondering whether an individual can compete against the massively computerized firms where computers are reading the news and placing trades in fractions of a second.
His income has come down significantly from three or four years ago and he is adjusting his trading and developing new strategies to adjust. Jelinek has wanted to trade since he was 16, so he isn’t bailing out and going to business school like some of his friends. Instead he is moving from equities futures into looking at bonds, currencies, a little oil, and stocks, doing moderate trading, perhaps four or five trades a day, holding some positions for a few months and also doing some day trading.
“I am trying to position myself for the future,” he said. His younger brother quit trading, moved to Seattle and is now doing well in an early stage technology company. Another friend went to graduate school at the University of Michigan and now works at Amazon, he said.
Meanwhile Jelinek is puzzling over the markets.
“It used to be when the VIX got over 30 we were all doing well. I would make my entire year in a few weeks.” However, in a recent crash, the moves were big only on the charts.
“But when you are in there trading it wasn’t like that. We used to make money almost every day, but now it has gotten hard. There’s a lot of computerized movement and things happen that humans wouldn’t necessarily do. The market doesn’t move from Point A to Point B. I see moves that happen all at once when the market opens; it is moving in a fashion that is hard to get your hands around.”
While ITG had a lot of traders and analysts and not so many programmers, the successful firms like Citadel seem to spend a lot of money on programmers who understand trading, quants and network specialists. The programmers seem to be the ones making the money.