They both remember the adrenaline pumping, the sweat soaking their colorful jackets, the paper trading cards feeling heavy in their hands as they waited in the Chicago Board of Trade Treasury pit for the government to announce its monthly employment reports.
At 7:30 a.m. precisely, Tom Baldwin and Steve Anichini would raise their hands, push back against the surging bodies of the traders around them, and shout their bids and offers for millions of dollars in contracts.
It was a thrill, a game and an opportunity for regular guys like Baldwin and Anichini to hit it as big as they did. Yet, those days are just about over. As consolidation sweeps through the exchanges and computers have supplanted much of what was done in the pits, a culture nurtured in Chicago for more than 150 years is slipping away, and the face of Chicago business will never look the same.
“It’s a bit of Americana, a bit of history, and when it’s gone, it’s gone,” said J. Allen Smith, a documentary filmmaker whose coming picture, “Floored,” will profile displaced traders.
The electronic age has finally caught up with the city’s flesh and blood open-outcry markets, forcing thousands of traders to adapt to “the screen,” as they call it, or find another line of work. Just as a maker of horse-drawn carriages went on to launch General Motors, some have embraced the new order. But many have found the skills that made them successful in the pits work against them in cyberspace, where the marketplace loses the physical dimension these economic athletes exploited.
“It takes a completely different type of person to stand bell-to-bell and scream their lungs out than to sit patiently before a screen,” said Smith. “That’s why they open a restaurant.”
Once among the busiest brokers in the Treasury market, Anichini did just that, pouring the moxie that made him a trading star into the Culver’s hamburger restaurant he runs in north suburban Lake Zurich.
Baldwin moved to a 26-bedroom lodge along Lake Superior, where he trades via computer at a fraction of the scale he did before, dashing off to hunt, fish and ride his snowmobiles to relieve the boredom of staring into his screens.
Some retired after cashing in their exchange memberships through lucrative public offerings, while others sought fulfillment in much different lines of work. Board of Trade veteran Chris Argires (the first name as published has been corrected in this text) opened a Foot Solutions shoe store, financial trader Garry Lobaugh bought a pair of go-cart race tracks, and Treasury broker David Garland swapped his trading jacket for a beige vest with his name embroidered over the breast at the Abt Electronics showroom in Glenview. Abt Electronics Chief Executive Bob Abt has hired a handful of former traders for his sales floor with “real good” results, he said. “They’re definitely aggressive, they’re nice and they’re smart. To be a trader, you’ve got to think what the customer wants and complete the trade.”
But even the best appliance salesmen can’t make the money Chicago traders were making. In its heyday, the trading pit gave risk takers with no particular pedigree a shot at riches. “It functioned as a place where the American dream could really happen,” said Caitlin Zaloom, a New York University sociologist who studies the markets. “They could make a huge amount of money. Of course, they could go broke in a second, too.”
As open-outcry goes away, so too does a piece of something uniquely Chicago. As computers take over, the advantage goes to the same Ivy Leaguers and math PhDs who rule the rest of the financial world, Zaloom said. “In Chicago more than anywhere else, open outcry has an economic and cultural place. Chicago really was a generator of pit traders. Where do guys working on screens come from? Not necessarily Chicago.”
Indeed, many pit veterans worked their way up from menial jobs without the advantage of any special education. Baldwin was in charge of smoked meats at a Cincinnati packinghouse when he took a trading course that piqued his interest. Anichini dropped out of college after a former basketball coach got him a job as a runner, the lowest entry-level position. At $450 a month, renting a membership in the early 1980s was “cheaper than renting a cab,” he recalled, and it gave him access to the biggest financial market in the futures business. “I had nothing to lose.”
Back then, the Board of Trade bond pit had the smell of a locker room, the action of a football field and a staff paramedic to treat the injured. Baldwin, who had three work-related knee operations, remembers a blur of “screaming, yelling, fighting, elbowing people, always getting spit on.” He loved it.
It was a strange melting pot–nearly everybody was big, loud, white and male, quite a few were related and not all were honest. But the bond pit, part of a financial complex that traded 2.5 million contracts a day last year, enabled those with the talent to see and feel the market in a way computer screens could never duplicate.
Losing money was a lot easier than making it. Baldwin lost $5 million one day in 1989, but, unlike many others, managed to claw it back. Employment reports were sheer terror. Anichini recalls throwing up from the stress in the minutes before the government released its numbers, then staggering from the bathroom to the pit for the opening bell. “If you can handle those next 20 minutes, you can handle real pressure,” he said.
Anichini was one of many keeping his eyes on the biggest trader in those days, Baldwin. “He knew when to get in and when to get out. It was like a poker game,” said Anichini. “I put myself into his shoes and played that game.”
Now, as far as Baldwin’s concerned, the game’s over: “You could see electronic trading was going to ruin it, and it did.”
Baldwin still trades, and says he doubled his money last year. But his electronic-trading account holds $1.5 million, measly for him. And, although he is building a track record at age 51 with the goal of attracting investors to a hedge fund he would manage, he considers the screen painfully limited.
In the pit, he would trade all day. But on the anonymous computer, he is more wary, in part because he can’t see who is trading. With none of the sights and sounds that provided such valuable clues in open-outcry, Baldwin never knows if Goldman Sachs or some other giant might be preparing to squash him, so he barely trades at all. Clicking the mouse too often is asking for trouble, and bouncing back from losses has gotten more difficult, he said. The key is to very seldom lose, which might sound obvious but represents a retreat from his insatiable appetite for risk in the pit. “The way to be successful is to be bored,” he said of screen trading. “If you’re high-strung and you need action, you do things you shouldn’t do.”
The transition was rocky. He left in 2000, but then lost a chunk of his fortune in the dot-com bust, when a technology company he had backed to the hilt went under. He returned to the pit in mid-2001, but within a year or two, the hustle-bustle had ended. “The pit was like an office. I decided to move to an office and at least be comfortable.” Among other features, his Granot Loma estate in Michigan’s Upper Peninsula has 60 fireplaces.
Anichini had a big adjustment, too, casting for the right opportunity before settling in 2002 on Culver’s, a Wisconsin-based fast-food chain known for its “ButterBurgers” and frozen custard. “You go from making millions of dollars to what is, in essence, a penny business. We were, in a sense, printing money compared to what it’s like here,” he said. “Running this business, you really have to watch your food costs, all the smaller particulars you don’t have to worry about when you’re making very good money. Down the road, it will catch up to you. You have to watch every cent.”
In the pits, he depended on himself and other rugged professionals, but now delegates to teenagers who require gentle mentoring. And, while the opportunities in the Treasury market were ever fleeting, the restaurant franchise is a long-term proposition: “You wrap yourself around the community.”
He joined the Chamber of Commerce and traveled with the local football team to supply burgers at the state championship. He gets in his car to deliver fries if a take-out order goes missing. Now 45, he could have retired, but then he never would have set up his family in a business. With a second restaurant opening in Mundelein within weeks, he’s working 12- to 14-hour days.
In the pit, Anichini worked hard, too, routinely holding his place throughout the six-hour, 40-minute trading sessions with no food, water, bathroom breaks, sick days or vacations. He was filling orders for big customers such as J.P. Morgan, who could have replaced him on a whim. When the customer orders dried up, Anichini didn’t even try trading on the screen, figuring that would never play to his strengths as a “people person.”
Even for those eager to point and click instead of shout, the transition tends to be tricky. The first wave of floor traders switching to the computer years ago “kind of stumbled,” recalled Curt Zuckert, associate director of a computer-trading training center at the Chicago Mercantile Exchange, where newcomers to the screen can practice. It typically takes months of trial and error, not weeks, as many traders assumed.
The transition from non-stop social interaction to the isolation of the screen can be “huge,” said DeBorah Lenchard, associate director of market education at the Merc. “You can’t see the market and how all the players fit together.”
To a degree, women have had more success on computers than on the trading floors, she noted, in part because size and strength play no role, while patience and sticking to a plan get rewarded. “Online, a lot more women are involved,” Lenchard said.
Success can come for old-timers, too. Board of Trade veteran Ray Cahnman trades far more now than he ever did in his decades at the exchange, playing many markets at once, thanks to the efficiency of computers, he said. His TransMarket Group has trading offices across the world. “There is more opportunity on the screen than there ever was on the floor,” said Cahnman. “The golden age of trading, it’s right now.”
No question, the hottest opportunities for budding traders these days come from hedge funds and other firms trading for their own accounts through complex mathematical models. But many avoid hiring refugees from open outcry. “They look for blank slates with math skills,” said Zuckert. “MBAs, not athletes”–and certainly not gravediggers from a gritty neighborhood on the Southwest Side.
Robin Cross was working at Holy Sepulchre Cemetery in Worth Township when a friend got him a job as a runner at the Merc. He had finished high school, but couldn’t afford college. “I had nothing,” he said.
As of two years ago, he had saved enough to become a broker on the fringes of the Merc lumber pit, one of its smallest and among the few without electronic access. Open outcry has a chance to last quite a while in this specialized market, as well as others for options on futures and agricultural products.
Cross is sharing his good fortune, training a clerk to start trading some day, paying back what he views as a personal debt to the marketplace where he got his big break. “The reason brokers gave me an opportunity is because they got an opportunity,” Cross said. “It’s an unwritten rule.”
And, like the rest of the trading-floor culture, that rule, too, is likely to give way as the market shifts to computers. “If it goes to the screen, that’s over. This will never happen again.”
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gburns@tribune.com
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