By Tony Huck, CEO, Score Priority
As America’s dominant financial centers continue reopening, I have found myself considering what has changed. And as I think about pandemic protocols and what lunch spots are still open for business, I’m also reflecting on how the trading industry has evolved in America’s two greatest cities.
New York and Chicago’s trading communities are like cousins. They’re related, they kind of look the same, and they have longstanding, unbreakable bonds. But, they are fundamentally dissimilar characters (with opposing sporting allegiances — full disclosure: I’m a Green Bay Packers guy).
Like most with pit jockey-related origin stories, my career has always revolved around the New York – Chicago connection. The alternative seems impossible given how market electronification gained momentum over the course of the past 30 years and the financial system became more intertwined. I’ve been speaking with some friends recently about their experiences bridging the Chicago – New York gap in their trading careers, and the next few pieces I will be putting out are the byproducts of those discussions.
So, how did we get to where we are?
The answer begins with asset classes. Wall Street, the Buttonwood Agreement — New York always equaled equities and capital formation. LaSalle Street, agricultural futures — Chicago always equaled derivatives and risk management. From their humble origins, we can trace the characteristics of trading in these two cities and see why these days, those environments blend into each other yet remain fundamentally different.
The asset classes matter because of who and how they were traded. Much stems from the concept of locals versus institutions. Wall Street was well-heeled big banks; Chicago was raucous individual (or small groups of) speculators.
Back in the day, Chicago’s derivatives exchanges had, relative to New York, cheaper seat leasing opportunities for interlopers to get into the trading game and, unlike the NYSE floor, did not require the years-long apprenticeship that was necessary to become a specialist. It makes sense then that Chicago’s pits were a different animal, a different type of liquidity provision operation with different sources of edge. Moreover, the culture of the trading community and risk appetite in Chicago was, and remains, a very leverage-centric one.
So on one coast sat suits and ties and stocks and in the Midwest there were colorful jackets and futures. No wonder cultural differences exist! These cousins, children of different siblings, ended up being brought together by technology and the development of equity derivatives.
I’m going to be taking a deeper dive into phone lines and eventually fiber optic cables and microwaves soon, but first, I need to find a lunch spot. (Is the Billy Goat still kicking around?)
The Big Apple vs. the Second City: Two Trading Towns first appeared on LinkedIn.
