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Pit trading

The original method of futures trading, conducted by shouting and hand signals in tiered octagonal pits on an exchange floor.

Until the 2000s, price discovery happened physically. Brokers filled customer orders and locals traded their own money, all within earshot. The system's advantages were information — you could see who was buying — and its weaknesses were access, cost and the scope for abuse.

Electronic matching on globex dismantled it. CME closed most futures pits in 2015; a few options pits lingered longer.

Example: the old S&P 500 pit handled a $250-per-point contract; today the equivalent flow is in es and micro-futures on screens, at a fraction of the cost per trade.

Related: open-outcry, locals, floor-broker, globex, e-mini

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