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SF Special: Former Grain Traders Pick Themselves Up Off the Floor
“It was a once-in-a-lifetime job.” “It helped me solve the mystery of my father, the trader.” “It turned me into a man.”
These are words used by former grain floor traders, describing a career with a rich and storied past.
For 126 years, Chicago has served as the hub for grain commerce. In the beginning, physical crops came by wagon, rail, or boat for traders to exchange for money. Traders were always right in the middle of the exchange between farmers and end users.
Physical trading evolved into a contractual agreement once the CBOT board members figured out that it was much more efficient for farmers to bring in a sample of their products instead of the entire crop.
The Chicago Board of Trade (CBOT) Exchange opened in 1848. Corn, wheat, and oats open-outcry futures contracts started trading in 1877. Soybean open-outcry futures contracts opened in 1936.
Open outcry is defined as actual human beings standing in a trading pit, yelling out bids and offers, and using hand signals to buy and sell contracts.
These contracts are used for farmers; end-users such as Cargill, Archer Daniels Midland, and many others; as well as speculators (investors outside of agriculture) to price crops into the future.
There is risk involved in using futures contracts. Floor traders in Chicago were called upon to execute trades for customers around the world. Even today, if you want to know what the world thinks corn, soybeans, and wheat crops are worth, you look to the prices trading in Chicago, Illinois.
Grain trading is what Chicago was built on – it became the nerve center of the city’s downtown financial district. The trading industry was so important to the city’s identity, it named all of its professional sports teams after the markets. The Chicago Bulls, Chicago Bears, Chicago Cubs, just to name a few. These were nicknames known around the world, reflecting the trading going on in this Midwest U.S. city.
Many people living in Chicago either worked at the Board of Trade or knew a relative, neighbor, friend, or church member who did: a big city, with big activity in grain trading, that had traders right in the middle of it all, a lot of them making big money.
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The money flowed through the trading floor, to the point that even support staff were given hefty bonuses and chunks of money during times of surplus profits. If the walls of the trading floor could talk, this reporter was once told while working at a desk on the floor, the stories might not be believed. Rumors, news that hit the floor at any moment, a phone call received by a floor broker, all created a spark for the markets to gyrate.
In the ag trading room, there were multiple hexagon-shape trading pits with layered steps. Hundreds of traders would be packed into each pit, violating all kinds of personal space rules, with the most experienced and heavy-hitter traders on the top step. The higher the step, the higher the prominence in the trading floor pecking order.
The flurry of trading activity has gone on for years with a lot of money made and a lot of money lost. Grain elevators, farmers, traders, brokers, speculators, all feel the pains and profits of the Chicago Board of Trade.
And through the years, traders have had a front-row seat in this process of exchanging commodities, helping farmers and others hedge risk.
Yet, much like the punch bowl being pulled from a party, a rumor of the closing of the ag futures floor became reality, sparking a hangover feeling for those struggling to move on.
From the onset of the rumor, traders were faced with the question of what they would do if they weren’t floor traders.
The floor was made up of generation after generation of family members who traded. If a trading membership was purchased by a family’s grandfather or uncle in the 1950s or 1960s, it was being held by third- and fourth-generation family members.
Trading was in the blood of many Chicago-based families.
CME GROUP CLOSES FUTURES FLOOR TRADING
In early 2015, the CME Group (formerly the CBOT) announced it would close the farm futures trading pits on July 2 of that same year.
Trading on the CME Group’s GLOBEX, the electronic trading platform, conducted online by hundreds of millions of traders globally, proved to be a more efficient and profitable trading method.
Open-outcry trade volume decreased by 75% since 2008. In 2015, open-outcry futures contracts made up only 1% of the company’s business.
The S&P 500 Standard Futures pit, which continues to provide an important venue for trading the underlying futures contract for the S&P 500 options on futures contract, remained open, as did all options pits in both locations except for the DJIA ($10) and NASDAQ 100 options, according to a CME Group press release.
In addition, in Chicago, all options pits were moved to a single floor in the company’s Financial Room. Still today, if you were to visit the CME Group trading floor, you would witness a much smaller number of traders in the ag-related options pits and the financial-related options pits.
While July 2, 2015, marked the last day of futures floor trading, it was the first day of the rest of a lot of traders’ lives.
While many floor traders moved into company offices or home offices to continue trading, many others traded in their former career for another.
They chose auto sales, copy machine sales, real estate or farmland sales, bartending, and many other ways to make a living.
We’ve chosen to walk through the lives of traders who had to pick themselves up off the floor, in search for another life away from the hustle and bustle and big money that came with trading agricultural commodities.
Jordan Moss, like many people at the CBOT, followed a relative into the commodities trading business.
“My late uncle, Adam Freedman, went from slicing corned beef at my grandfather’s Chicago restaurant to becoming one of the better spread traders in the corn futures pit. He got to know the market very well, traded big quantities. At the time, I was working in my father’s restaurant. I thought my uncle had made the jump from the restaurant business to being a trader so well, that I thought I could do it,” Moss says.
In 2000, after working as a clerk for his uncle on the trading floor, making a few hundred dollars a week, Moss caught the bug to trade. His uncle loaned him seed money, and off he went.
“I started making money after a year of trading spreads. A lot of people on the floor would have agreed that it’s a once-in-a-lifetime job,” Moss says.
The floor trading environment is its own world. It’s a microcosm, traders say.
“And when you step into that world, there is a lot of emotion. You can make a lot of money and lose a lot of money,” Moss says.
Traders have always been hush-hush about what they made.
“It varied, but traders could make between $1,000 a day, which is $5,000 per week, $20,000 a month, ultimately $200,000 year. If you couldn’t make that amount, you probably couldn’t make it in the pit. The more aggressive traders could make $10,000 a day. But you could lose that amount, too,” Moss admitted.
The truth of the matter is that when commodities traders tell people what they do for a living, people first think of the upside.
“The reality is that most guys failed out. And when you failed out, you weren’t only unemployed, you lost your money. It was almost a barbarian feeling ... When you stepped into the corn pit, it was live or die – and the strongest trader figures out his or her way. There are a lot of ways to skin a cat, but you had to figure out one way and use it to survive,” Moss says.
Nearly Going Broke
As he pondered his days on the floor, Moss recalled the night that he almost didn’t survive the business.
“My closest call at going broke came in my first year of trading. I remember it well. It was the worst night of my life. My profit-loss statement was dropping like a rock,” Moss says.
To make a few extra dollars, Moss would trade a little bit on the electronic trading platform at night. One night he brought home an open position from the day-trading session and then, during the overnight session, hoped to trade out of it and make a profit.
“I got busy, and it was getting late into the night. My position was resting below the current price, waiting for someone to bid on it. But a ‘sell’ position came in and took out all of the bids all the way downward. The market dropped 10¢ with very few people trading. I was stuck in my position and couldn’t get out.
It was about 3 a.m., I had $25,000 in my trading account, and I was down $21,000. I said to myself, that’s it, I’m washed out in my first year of trading,” Moss says.
The market came back to him, fortunately, around 5 a.m.
“So, I went to the trading floor pit once it opened later that morning. I quickly got out of all my long positions, and then the market tanked. Bottom line, if I hadn’t gotten out, I would have been destroyed and lost even more than what was in my account. Usually, your account is built up enough to absorb a $25,000 loss, but not at that time of my life. That would have been it for me,” Moss says.
Unlike so many other traders, Moss didn’t have a great tolerance for risk. Ultimately, that helped him be a better trader.
“I would get out of my losers and winners and take my profit. That’s why I never had huge years, because I was eager to take my profit. No one ever went broke taking a profit. That’s a saying, yes, but that was always me,” Moss says.
He adds, “I made a great living by working from 9:30 a.m. to 1:15 p.m.”
“There were huge life lessons from the floor that turned me into a man,” Moss says.
Between learning industry language and skills that he never thought he could pick up, nearly 10 years working in the trading world gave him a lot of confidence.
“I learned that those tasks and jobs that seemed impossible were ones that I could accomplish and, as a result, achieve. Trading also taught me that as long as you can come back the next day, after failing, you can still be successful.
Moss added, “In the pit, you take a lot of verbal abuse. It doesn’t matter what religion you practice, what race you are, you will take a lot of grief. It preps you for the real world.
The former trader is now the associate partner of The Energy Exchange group, a specialized recruiting firm for the agriculture and energy market.
“I use my trading skills in my new career. As long I can come back for a new day, there is opportunity ahead of me. In my new job, I’m face-to-face with my clients. I don’t know if it’s because I was a pit trader, but I like to do business face-to-face,” Moss says.
In 1988, at the age of 16, Kelly King started as a floor clerk for her father, Richard “Whitey” King, a top-step corn broker on the CBOT floor. He had his membership since 1965.
“1988 was one of the worst droughts in a long time for crops. The activity on the floor was very frantic. So, my dad and his partner needed a lot of hands on the floor to help. Traders were calling on cousins and kids to help with all of the business. It was like baptism by fire because it was a very busy time on the floor,” King says.
King would spend the rest of her summers throughout high school working for her father. She was employed as a full-time floor clerk for him, after graduating from college. Though not consecutive, King spent over 22 years of her life on the CBOT floor.
In 1997, Whitey King convinced his daughter that going into partnership with him was the best career path.
“I don’t know if it was or not, but at the time it seemed to make a lot of sense. My dad purchased a full membership for me to use, allowing me to fill orders on the top step of the corn pit,” King says.
MY DAD, THE BROKER
“My whole tenure on the trading floor was about unlocking the mystery of who my dad was,” King says. “That’s why I went there. I felt very privileged that he allowed me access to that part of his life.”
King’s mother was not as excited to have her young daughter on the floor.
“But I was just so excited to be with my dad. We used to go visit the floor, as a kid. The place was so mysterious to me. It was definitely not your typical ‘dad’ job that you’d see on TV with offices and desks. I was always fascinated with him, and I would get up early in the morning and go downstairs to listen to the morning farm report on the radio. Even that held some mysticism for me. The farm broadcaster’s voice captured my imagination, and what he was talking about,” King says.
Specifically, King’s job as a broker was to stand in the pit and take a buying or selling order from a firm outside of the pit and then execute the order. Though one of the few women on the floor, she enjoyed her job.
“Eventually, I was the only woman in the corn pit. It really was a once-in-a-lifetime job,” she says.
To this gender-minority broker, the trading floor was highly organized and efficient, even though it looked like total chaos. “You couldn’t imagine that people could understand each other, the way they communicated with hand signals and screamed trade lingo. At the height of its powers, the open-outcry system was the most efficient thing ever because the local traders in the pit made it that way,” King says.
Her veteran broker-father retired in 2008, 18 months after the electronic trading system came to the pits.
“I was on my own until the floor closed in July 2015. I missed him every single day that he was gone,” King says. “We are still very, very close. We fought like cats and dogs at work, but he was a good teacher. Overall, I’m a little closer to understanding the man.”
King is currently a real estate agent in the city of Chicago. She rarely thinks about her trading career and didn’t agree with the closing of the floor.
Bruce Hillyer, a 14.5-year CBOT floor broker for mainly financial products, went from earning a six-digit salary to making $10 an hour slicing deli meat at a local Chicago grocery store.
Hillyer started at the CBOT in 1983 with Merrill Lynch, in the grain trading room. He would go on to work for some other big companies like Prudential Bache; A.E. Staley Grain Manufacturing Co.; and Aubrey G. Lanston Co., the Rolls Royce of primary dealers. And he worked for UBS (Union Bank of Switzerland).
“When I first went to the trading floor, it looked like heaven to me. You could just feel the energy, feel the money on the trading floor. I always thought that I wanted to be a stockbroker, but when I first witnessed the Chicago floor trading, I said, ‘This is for me,’ ” Hillyer says.
Yet, once on the floor, Hillyer realized it wasn’t as easy as he thought. “It’s extremely stressful. It’s organized chaos,” Hillyer says.
“I received an order, time-stamped the order ticket, wrote the order on a ticket, and used hand signals to flash the order to the trading pit, where it would get filled. That would be relayed back to me by hand signals to my telephone desk. I would then inform my customers on the phone of the results.
“So, I had to read the markets and give informed commentary to my customers about future market direction all at once,” Hillyer says.
There were bad days on the floor, and then there were really bad days. Quick decision-making was a required skill.
“Because of a hand-signal error, I did cost my employer $47,000 one day. I essentially gave away a Lexus. My employer thought enough of me and my performance over the years that they didn’t let me go,” Hillyer says.
LIFE AFTER TRADING
As early as 1998, the handwriting was on the wall for floor trading to be replaced by the electronic trading screen, with the introduction of the Globex system.
“Like a lot of other traders, I hadn’t finished my college degree. Once I had figured out that the handwriting was on the wall for the future of floor trading, I decided to take the money, offered in a volunteer redundancy severance package as a result of the UBS-Swiss Bank merger, and found another direction for my life. Though I left the floor at age 40 and went back to Northwestern University to finish my undergraduate degree (earning a 4.0 GPA), it didn’t help me find a job. Unfortunately, I graduated just as the dot.com bubble burst in 2000 and couldn’t find a job,” Hillyer says.
He adds, “My friends at the Board of Trade all told me, “Bruce, don’t come back here, don’t even think about it. The place is dying. Just go do something else. You have to reinvent yourself. We are all proud of you for leaving. Go build another life.
And so he did. After trying his hand at selling copier machines, selling radio advertising, and working for an air-freight company, Hillyer had an opportunity to return to the securities industry once more.
After the infamous Lehman Brothers debacle that rocked the financial trading world, however, Hillyer found himself working at a local Chicago grocery store in the deli department.
“I really had to swallow my pride, after making a six-figure salary with the hedge fund and graduating summa cum laude from Northwestern. There I was slicing deli meat, asking the customer ‘Is this thin enough for you ma’am?’ It was a pretty humbling experience. That was the closest to depression that I had ever come. My poor wife was overcome with worry,” Hillyer says.
SAILING AND TRADING
What happened next to Hillyer would be the twist of fate that could define his working life.
While at his deli job, Hillyer peered through a window to see the sailboats docking at Lake Michigan preparing for the upcoming season. Sailing was a longtime passion of this former trader. So, he got on as a sailing instructor.
“I’m fascinated by the physics of sailing. A sail is nothing more than a vertically-mounted airplane wing that creates lift,” he says.
Hillyer learned about flying from his father, an Air Force jet fighter pilot and commercial pilot.
“When an airplane takes off, it’s not being pushed up by the air beneath the wings, it’s being lifted by the suction across the top of the wing. The air has to travel faster across that curved surface of the wing, which creates a relative low-pressure zone, which then sucks the airplane up into the air. So, it makes the airplane fly,” Hillyer says.
Likewise, that same effect makes a sailboat go through the water, Hillyer explains. “It can sail into the wind. It’s a very cerebral activity that appeals to me. No two days are the same. You meet all kinds of great people in the sailing world. And I was into the competitive aspects of sailing and racing.
“Trading and sailing are analogous. You are scanning multiple inputs in trading much like sailing. From news stories to other commodities prices, you have to be aware of a lot inputs at once,” Hillyer says.
Lifelong Floor Lessons
To this day, Hillyer preaches three principles that he learned from the Chicago Board of Trade:
- 360° awareness. “On the sailboat, it means scanning to see what’s going on and around the boat such as traffic, wind patterns, waves. It’s like attention to details on steroids. And it is essential in the trading business,” Hillyer says.
- Communication. “On a sailboat that means if you see something, say something. We don’t want anything to happen that comes as a surprise to somebody. All crew members need to be on the same page in trading, too. Not saying something important can cost your company a lot of money,” Hillyer says.
- Anticipation. “Visualize the downstream impacts of what you are about to do. It’s like thinking two and three steps ahead,” Hillyer says.
So, his childhood and adulthood experiences became one.
The sailboat instructing gig was good for the summer, but winter was approaching. As fate would have it, one of Hillyer’s sailboat students had a relative who was looking for someone to work in the heating, ventilation, and air-conditioning (HVAC) industry.
Hillyer accepted an offer immediately and went to work for HeatCool Service Company of Chicago. And that’s where he found his new career.
For former traders like Hillyer, the gravy train came to an end when the futures pits closed.
Now he’s found a new career path and wouldn’t trade it for the world.
“I always remember the old saying: When you have the ball, you run with it. I tell people, there will be times in your life when you won’t have the ball anymore. And you’re going to wish that you could get it back. At 57 years old, I was offered the ball back," Hillyer says. "God answered my prayers. I have goose bumps just talking about it. When somebody offers you the ball, again, you take it. And I did.”