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