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Traders floored by technology

James Allen Smith

TEXT OF INTERVIEW

Steve Chiotakis: Computers have revolutionized how we do business. Whether it be automated manufacturing, word processing, even simple things -- e-mail, voicemail. But for some floor traders in Chicago, computers have been a nemesis to careers. A new documentary highlights this intersection of technology and tradition. James Allen Smith is the director of "Floored," which is set to debut at the Austin, Texas, Film Festival later this month. His film takes us on a journey that starts with the shouting floor trading mobs of the Chicago Mercantile Exchange. James Allen Smith, welcome to the program.

James Allen Smith: Good morning, Steve.

Chiotakis: Why are these people screaming?

Allen Smith: Well these guys are screaming because they're trying to buy and sell. And they're actually buying for themselves. And when they're selling, they're selling for themselves, so they're pretty anxious to do well.

Chiotakis: And what are they doing? They're buying and selling what?

Allen Smith: Pork bellies, milk, grains, oil. I mean, you name it. They actually trade the weather, believe it or not.

Chiotakis: So obviously the documentary talks about how there are fewer and fewer traders in the pit. What's causing these people to vanish?

Allen Smith: Technology, basically. Computers just do it faster.

Chiotakis: There's this one scene in the documentary. It's this floor trader debating with the computer trader and he says, "I can't beat the computer." I want to hear a little bit of that.

Scene from "Floored:"I say the computer is the worst and the most evil thing of trading that I've ever seen.

Chiotakis: I mean that's an impassioned argument. The guy's saying, "This is my livelihood and this inanimate object made it go away."

Allen Smith:Yeah, I mean the thing is these guys have been doing something their whole life one way. And then someone comes in and says, "No, you're not going to do it like this anymore. Here's a computer, and you do it like this. And you do it quietly and you sit and you mind your manners, and you click "buy" when you want to buy and you click "sell" when you want to sell. So they have a problem with that. These guys, like you said, they scream and they yell. They look each other in the eye. It's like a poker game. Now it's anonymous.

Chiotakis: James, how have the people you interviewed for your documentary, how have they fared in the financial crisis?

Allen Smith: It was really tough. A couple of guys had a really hard time. And they felt it, they really felt it. And you see that in the film. There's another couple of guys who did quite well. Again, the market moves really quickly when it goes down. And they can take advantage of that by selling high and buying it back low.

Chiotakis: Well James Allen Smith, director of "Floored." We do appreciate you being with us this morning.

Allen Smith: Thanks so much.

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Am smith q.. I like it :)

I entered the business (I worked on a sell-side desk) in 2003 and a lot of changes had already occurred but even in the last seven years or so since I joined the business, technology has just taken over. It is amazing to see in my relatively short career, the curve has been super steep. But, I truly miss calling the floor (NYSE) and asking Vito or Vinny to give me best execution. I watched the two dollar brokers close shop in front of my eyes. On one hand, I miss that "human" touch -- the guys at the floor always had these stories for you. The best part of it is when you went out with them, for a round of drinks. They just opened up -- these guys were tough and for the most part, fair. I have stopped going to the movies but this is one documentary that I will definitely not miss. It is terrific to see someone had the common sense to capture this in a time capsule. The stories.....I miss those legendary stories.....

I started running cards at the CBOT for $6.oo an hour. Got a job checking trades with all aspirations of being in the pits trading it up. Was an arb clerk in the 30 yr. bonds and 10 year notes. They were stressful and crazy times.
I now trade on the computer, point and click buy and sell. Have been doing so successfully since 2001. May not be the same as the pits but times change and either we adapt or we die!

Please let's do not forget about the support and tertiary people - GRANTED - whom would not have had jobs without you traders. But many of us lost our jobs as well due to the computer.

The skills we honed, perfectionism in understanding hand-written trade data, quality control, trade re-creation, logic, persuasion, emotion: people skills, diplomacy, patience when called for, speed when demanded, insanity when necessary, defending the integrity of our brokers and traders in trade checking sessions. Some by hook, others by crook. And the stories. Oh yes the stories! We had them too!

Think I'm romanticizing our positions and plights? Us trade checkers?

Being called incompetent one second and having saved the house the next - with nary a pat on the back.

Bygone era, bygone time.

And now nothing.

When frenzied trade checking sessions go, trade assisting goes. What is left for anyone anywhere?

Our technological friend: the computer.

And for trade checkers and trade assistants: the unemployment line.

I miss trading on the floor so much. I miss hanging out with the guys, the stories, the hot clerks, the bets, the fights, the risk, sweating thru my clothes, screaming till I lost my voice, the feeling of knowing what to do at the precise moment without thinking. All of that is gone. It was like going to play in a state championship football game everyday. I watched pit trading die twice. Once in the dow pit (financial room)and then again in the soybean pit. It was like watching your dog die and there is nothing you can do but watch. Trading on the screen and trading in the pit is like comparing apples to snowmobiles. I went from going to the floor daily to 3 times a week to 2 days a week to zero fairly quickly. I went from trading 100, 200, 500 contracts at a crack in the pit to trading 2 on the screen. I traded at home by myself for months and found myself on a very step learning curve. Recently I moved into an office in Lake Geneva with some guys from the floor and have started to flatten out the yield curve. It's good hanging out with the guys again telling stories and working to flatten that learning curve. It can be done. I know there are many who have given up trying to make the transition, but it can be done.
Thanks for making this movie. I'm glad someone is telling this story. It's incredible how things can change so drastically so quickly.

technology has changed the junkyard business forever. Evertyhing is computerized. Auctions are specifically changed, we used to visit every auction and inspect every car personaly. We said we could never buy wrecked expensive cars without inspecting them in person. we attended a few auctions per week, inspecting a hundred or so cars. Now we buy cars all over the US, and work 20+ auctions from our chair viewing our computer. we view cars days before the auction and leave proxy bids, and the auction computer does the rest. We are better able to control our cost of goods by buying just what we want. Our computers tell us based on demand and sales exactly which parts on which cars we need as well. I sold my junkyards to Ford Mtr co in 99, but am still actively involved with the industry with my kids and consulting.

Cal,
Why aren’t you using a bar code scanner? Did I miss something here? With a bar code scanner one should only need to push one or two keys for the total transaction.

FYI, with the next gen RFID, you won’t even need to unpack the basket or cart to get a detailed list and a total of all the items in the customer’s purchase.

When I began my sales career in 1967 if you waked into my store to puchase and item, I had to enter four keys to obtain a receipt. My employee key, department, sales tax and total. Done. Today, with my POS software, if you come into my store I have to click my mouse a minimum of 19 times to accomplis the same task and then wait for the processing time. Avg. sale time is 3 minutes. And this is what we call progress.

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