NexusFi: Find Your Edge


Home Menu

 



Open Outcry

Open outcry is the name of a method of communication between professionals on a stock exchange or futures exchange typically on a trading floor. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.

In an open outcry auction, bids and offers must be made out in the open market giving all participants a chance to compete for the order with the best price. New bids or offers would be made if better than previous pricing for efficient price discovery. Exchanges also value positions marked to these public market prices on a daily basis. In contrast, over-the-counter markets are where bids and offers are negotiated privately between principals.

Since the development of the stock exchange in 17th century in Amsterdam open outcry was the main method used to communicate between traders; however, this started changing in the later half of the 20th century. First through the use of telephone trading and then starting in the 1980s with electronic trading systems.

As of 2007 few exchanges still have floor trading using open outcry. The supporters of electronic trading claim that they are faster, cheaper, more efficient for users, and less prone to manipulation by market makers and broker/dealers. However, many traders advocate for the open outcry system on the basis that the physical contact allows traders to speculate as to a buyer/seller's motives or intentions and adjust their positions accordingly. As of 2010 most stocks and futures contracts are no longer traded using open outcry due to the lower cost of the aforementioned technological advances.

Source:
https://en.wikipedia.org/wiki/Open_outcry

See also:
https://www.investopedia.com/terms/o/openoutcry.asp


In July 2015 the CME closed all open outcry trading pits except for Futures on the S&P 500 and Option contracts.

Source:
https://investor.cmegroup.com/investor-relations/releasedetail.cfm?ReleaseID=894826

See also:
https://www.ft.com/content/33141038-01b9-11e6-99cb-83242733f755
https://www.cnbc.com/2015/02/06/its-hard-to-mourn-the-loss-of-open-outcry-trading-commentary.html



© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top