Independent floor traders who bought and sold for their own account, providing the pit's liquidity.
Locals were the original market-makers of futures: they stood in the pit all day, bought the bid, sold the offer and tried to end flat. Their edge was the spread plus the information advantage of seeing which brokers were working size.
Screen trading replaced them with algorithms, but the function is identical — capture the bid-ask-spread for taking on inventory risk — and some of the vocabulary survives in phrases like "the locals are short".
Example: a local buying 50 lots on the bid at 1,000.00 and selling them at 1,000.25 made a quarter point many times a day on a contract where a quarter point was $12.50.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
Educational only, not advice. Spotted an error? Post in Site Feedback.