Futures dealers have no idea what happens the day after tomorrow

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The Independent Online
ANOTHER THREE pits closed yesterday, and the workers were solemn as they shared their drinks. "I've worked there for 10 years," said Steve, not his real name, "and when my pit closes in April I'll probably get one month's money as a payoff." Another added: "Every industry goes through it, doesn't it? It's the effect of technology."

The pits which closed, however, did not mine coal. They were the "open outcry" trading pits for short-term money options at the London International Financial Futures Exchange (Liffe), near Cannon Street station in London. That is where the men, and a few women, would wave their arms and yell for hours on end, buying and selling millions of pounds and making profits or losses by exploiting marginal differences in percentages.

Hardly miners; often they received salaries of pounds 50,000 plus, and Christmas bonuses to match. But they too are facing the scrapheap, many in their 20s, with no qualifications, no job prospects, and not even the expectation of a Christmas bonus.

There were no tears, though, in the pits that closed. They had been abandoned for weeks: Liffe's managers announced their closure on 25 October. Within days, the traders were sacked, or moved to "onscreen" trading, where the buying and selling is done by clicking a computer mouse.

Yesterday was the culmination of years of developments in which Liffe, founded in 1982, has felt obliged to move to screen-based trading, just as the Stock Exchange did in 1984. Among the workers, though, there is disillusionment. "Sure, I've been to good restaurants, played golf on nice courses," Steve said. "But at the end of the day the only people really making money from this are the owners of the firms. After April what will I do? If I ring up an employment agency and say I'm late-20s, I've worked at Liffe for 10 years, they put the phone down. They think we're all wankers. It's like being an injured footballer. They just say goodbye."

The effects of the drive to technology have been brutal. Of the 3,000- odd pit traders, only 20 per cent are needed for onscreen work; and the characteristics that make a good pit trader, such as ebullience and aggression, can be counterproductive in a screen trader.

The rest are redundant, often with little pay-off. A few pits remain open, where people trade futures and options in commodities such as coffee and cocoa. But a sword hangs over them too, with screen-based trading expected to replace them by next April.

Meanwhile, for onscreen traders the working day has lengthened. Rather than the 7.30am start and 4.30pm finish that was routine in the pits, screen-based traders now start at 7am - when the German Bund opens - and carry on to 6pm. Margins on trading have also been squeezed. "Yeah, welcome to the Internet," said Matthew Fochs, a partner in SGF Futures and Options, which still employs a few staff in the remaining pits, but has mostly moved onscreen. "People in the pits were the middlemen, providing a valuable service. But technology has found a way to replace them."

The remaining pit traders, however, mistrust the onscreen system's ability to work as well as open outcry. Another trader explained the difference this way: "Say you need a cigarette, you're really gasping, and you want to buy one off me. Maybe it's worth 10p and I offer it to you for 11p.

"But you're in the pit, so you go round and you can find the market spread is 9p to buy and 11p to sell, maybe you can get the price down to buy at 10p - or maybe you decide the price is fair, given the market. But if it's just up on a screen and it says 11p to buy, how do you know if you're getting the best price?"

And what about peak periods? "If the ERM thing of 1992 [when the Government lost billions in a single day trying to prop up the pound] happened again, the computers couldn't handle it," Steve said.

Easy mistakes can also be made using the computers. In the summer a screen trader clicked the wrong box, and instead of seeking bidders for a raft of gold futures, found himself committed to selling it at a crazy price. "The guys on the floor just raped him," Steve said. "In open outcry, that couldn't have happened."

With the pits, another badge of identity - the coloured blazer - has also gone. "Ah, it's sad," Mr Fochs said. "They just hang them up in the office. It's like rugby shirts in a changing room, all unused."

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