Chicago's Eurodollar Open Outcry Pits Are Fighting For Their Lives To Remain Open Post-Pandemic

The CME eurodollar trading pit - long been facing the threat of extinction as Skynet takes over trading - could finally be facing a perfect storm of headwinds in the coronavirus pandemic.

The pits are arguably the worst place on the face of the Earth to be during a global pandemic is which being spread by droplets. Traders crowd shoulder to shoulder and scream at the top of their lungs, often breathing and sweating on one another, to execute trades. 

But in the Eurodollar options pit, traders seem to think they'll eventually be back, according to Bloomberg. Traders there feel like they can perform better than algorithms and have an advantage on the floor that computers don't have.

CME member Pete Kosanovich said: “When it gets busy, there is still a buzz, you can feel things happening. When you hear stuff happen in other pits, it’s a lot like being at Augusta and hearing the ‘Tiger roar.’ If you hear something happen in Treasury options, you can get ready for something to happen in eurodollar options.”

The floor closed abruptly on March 13 alongside of other trading floor operators, like ICE and CBOE. 

Others, who favor electronic trading, think the time is right to finally do away with floor trading. Christian Hauff, CEO of Quantitative Brokers, which sells trading algorithms for U.S. Treasury securities and Treasury futures said: “This is the opportunity to not look back but move forward as an industry.”

Those in the pit argue that the nature of the product keeps open outcriers in the game. The futures debuted in 1981 as a way to speculate on interest rates paid on dollar deposits overseas. They are the most traded interest rate derivative as of last year, with a daily average volume of about 2.7 million contracts in 2019. 

In the pit, trades are often structured as spreads, straddles or butterflies - which traders argue gives humans an advantage, due to the large number of possible trade combinations. Kosanovich, for example, has brokered trades with as many as 16 legs. He says he has seen trades with as many as 24. 

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