It was a loud, sweaty, crowded, arm-waving world. There were fistfights. “You want to meet out by the horse?” was the challenge, meaning out at the sculpture in the plaza. And dozens of curious traders would follow to watch the action. The brightly colored jackets traders wore were there for one reason: to be seen in the scramble for attention.
     You didn’t need a fancy diploma to be one of them. You needed an in, and money, too. Some traded their own accounts. Others worked for firms. Either way, you’d receive an order — say, buy this much November wheat at 5 — and through hand signals would find somebody willing to sell that much November wheat for 5 — a deal was struck, recorded on little cards, the cards handed to clerks just outside the pit (identified by their golden-yellow coats) who would take the order to their clearinghouse to be filled.
     Now, that’s all done by computers. On Monday, the futures pits are being shut down (a future is when I pay you $1 for a dozen eggs that you will deliver in October). The options pits still remain in operation (an option is when I pay you a nickel for the right to pay you $1 for a dozen eggs in October).
“Options are difficult to transfer through screens,” said Melamed. “People still like to do it their own way. And as long as it's viable,we don’t have any reason to lose them.”
Melamed estimates that 15 to 20 percent of volume in options comes from trading in the pits, as opposed to futures, which were producing less than 1 percent of trades.
     “It really was a chore to keep them going.” he said.
     The Chicago Board of Trade and the CME merged in 2007, and the trading pits are in two rooms — agricultural and financial — at the Board of Trade’s Art Deco skyscraper at 141 W. Jackson.
     Futures pits in both rooms will be taken apart between now and September. Then, options pits in the agricultural room will move to the financial room, and the physical agricultural pit space will be converted to cubicles and rented to traders.
     The CME was created in 1919, growing out of the Chicago Egg and Butter Board. What was it about those two commodities that sparked the futures market?
     “When it first began, in 1897, the production cycle of eggs was quite different than today, when chickens lay eggs 24 hours a day, ’round the clock,” said Melamed. “There was a seasonability to it.”
     Thus large bakeries could lock in the eggs they’d need next year now.
     Melamed said he had eggs in mind in 1972 when he realized he could do the same thing with international currencies.
      “I thought you could use the same principle in finance,” said Melamed. “I launched the International Monetary Market. We went from eggs to yen.”
     Understanding futures made many traders rich, though laymen could have trouble grasping what was happening. Melamed remembers a visitor from Iowa asking him to see where the “Swiss hot dogs” were trading. Melamed had to think about that for a while before realizing what his guest meant.
     “You mean Swiss francs,” he replied.
     Such misconceptions linger. For instance, when most people think of futures and options, they think: corn, wheat, pork bellies, rice and such. And those are traded. But all of that accounts for only 15 percent of CME’s volume. The other 85 percent is the twist on egg futures cooked up by Melamed in 1972: financial instruments such as currency and stock index futures.
     And a computer works better for that kind of trade.
     “The computer took over almost everything,” said Melamed. “In your world, in our world, in everybody’s world. We no longer have elevator operators. And there are no brokers in pits because screens are much more efficient.”
     How much more efficient? Before computers, the CME was doing well if it completed a few million transactions a year. When Globex electronic trading was launched in 1992, it took 15 seconds for an order to finish being processed, and that was considered fast. Now, it takes three milliseconds, and the CME conducts 15 million trades every day.
     “The world has benefited by computer in every aspect of our lives,” said Melamed. “Google and iPhone and Facebook and Alibaba. We can’t go back to the way it was. It’s quicker and safer.
     “Having said that, you lose the family. It’s all very sterile, no noise, no shouting. That’s hard to let go.”