On April 3, 1848, a group of 83 merchants founded the Chicago Board of Trading. It was an exciting enterprise. Futures Trading permitted buyers and sellers to manage their risk against unpredictable price fluctuations. If both buyers and sellers were able to agree on a price ahead of time, it was called a Futures Contract. This agreement allowed them to protect themselves from paying too much or selling for too little.
As the exchange grew in popularity, at times there would be more buyers than sellers or too much of a product without anybody interested in buying it. Entrepreneurs took advantage of this imbalance and worked in the middle as both buyers and sellers. This allowed them to profit by speculating using their own money. At the same time, they provided much-needed liquidity, which is the ease with which goods can be bought or sold in the marketplace. These early speculators became known as traders.
Chicago is known as the trading capital of the world. What a lot of people don’t know is that sometimes the trading gets physical. When it all started, it was based on gentlemen’s rules: integrity, honesty, and mutual respect. But the reality is that the pit brought out the worst in everyone. So spitting, poking with pens, and stepping on feet were all acceptable and even ignored.
Trading is definitely not a normal job: you don’t get a salary every two weeks, there’s no health plan or 401k. That might sound discouraging to some. But the truth is that if they were to get a taste for the money you can make, few would want to go back to the corporate world. Even though trading meant you can easily make or lose thousands of dollars in just one day, many men and women saw it as their golden ticket to financial success.
The Chicago trading floors have been the scene of primitive buying and selling for the last 150 years. More than 10,000 men and women traded on the floors up until 1997. Whether people want to admit it or not, it was a form of gambling with phenomenal rewards. But then computer trading was introduced. Since then the number of traders has dwindled down to about 10% of what it used to be.
A computer screen does not offer the adrenaline rush of the trading floor.