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. 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 the 17th century in Amsterdam, open outcry was the main method used to communicate among traders. This started changing in the latter 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, a few exchanges still had 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 still 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 were no longer traded using open outcry due to the lower cost of the aforementioned technological advances. As of 2017, open outcry in the United States was very limited, such as in a much more stream-lined form at the Chicago Board of Trade owned by the CME Group. Since the 1980s, the open outcry systems have been being replaced by electronic trading systems (such as CATS and Globex). Floor trading is the meeting of traders or stockbrokers at a specific venue referred to as a trading floor or pit to buy and sell financial instruments using open outcry method to communicate with each other. These venues are typically stock exchanges or futures exchanges and transactions are executed by members of such an exchange using specific language or hand signals. During the 1980s and 1990s, phone and electronic trading replaced physical floor trading in most exchanges around the world., As of 2007, few exchanges still have floor trading. One example is the New York Stock Exchange (NYSE), which still executes a small percentage of its trades on the floor. That means that the traders actually form a group around the post on the floor of the market for the specialist, someone that works for one of the NYSE member firms and handles the stock. As in an auction, there are shouts from those that want to sell and those that want to buy. The specialist facilitates in the match and centralizing the trades. On 24 January 2007, the NYSE went from being strictly an auction market to a hybrid market that encompassed both the auction method and an electronic trading method that immediately makes the trade electronically. A small group of extremely high-priced stocks isn't on this trading system and is still auctioned on the trading floor. Even though over 82 percent of the trades take place electronically, the action on the floor of the stock exchange still has its place. While electronic trading is faster and provides for anonymity, there is more opportunity to improve the price of a share if it goes to the floor. Investors maintain the right to select the method they want to use.