Laura Pedersen (Laura Pedersen) started working on Wall Street in 17 years; in 20 years she, By the way, was the youngest, which had its own place on the American Stock Exchange (her employer rented this place for her, since she did not pass the age to own it). Before reaching another 24 years, she did 1,5 million. Doll. Growing up on the outskirts of d. Buffalo, Pedersen is a born entrepreneur: at the age of six she was selling tomatoes from her mother's garden, played poker and bet on horses; asked for company shares at ten years old “Pepsi-Cola” as a birthday present; in 14 years went to New York on an excursion to the American Stock Exchange (АМЕХ). After her first boring semester at the University of Michigan, she dropped out.. “If I wanted to be a movie star, – she reflected, – I think, I would head west, to Hollywood; and since I was only striving to make a fortune, I flew east, on Wall Street”.
In January 1984 Pedersen began working as a clerk, Earning 120 Doll. in Week. She has worked for several companies, before settling in “Spear Leeds Kellogg / Investor Company” as a secretary of traders. When traders went for a smoke break, she briefly replaced them. It was the world, full of obscene language and vulgar gestures. As Pedersen said: “Four years, I have traded for three months and thirteen days – at first as a pinch hitter, then as certified specialist – I did everything, what my parents told me never to do”. Over the past four years, she has made decent for her company. 5,3 million. Doll. arrived. In October 1987 of the year, in days of collapse, she did 100.000 Doll. in that day, when the bubble burst, but the next week I lost 1,6 million. Doll.
Pedersen ended her activity, visiting a doctor, who advised her to leave, as the consequences of her work were health problems, throat related, ears and eyes. She was 24 of the year. She kept a diary over the years, became a book “Toy money” (Play Money). In this book, she recalls such extreme moments., how during the fire nobody left the trading floor, afraid of losing money. There were no regrets in the book. “The reason, on which I wrote “Toy money”, – she said, – in my desire to testify that, what I perceived as the last breaths of the art of trading, almost abundantly replaced by high technology”. The article “The Last Frontier” the exact picture is drawn, what does it mean to be a trader, and described, how to survive in the animal pit.
The Last Frontier
If there is such a thing, like a job like “spiders in a jar”, then the trading pit of options corresponds very closely to this concept. One of my friends loved to talk, when trading is in full swing: “The only main rule – have time to poke a finger in a person's eye, before he pokes himself into your”.
But the days of the trading floor, maybe, numbered: the whole concept will be forced to become an anachronism, as soon as the market is fully automated at the beginning of the twenty-first century. Ecommerce has already revolutionized the Cincinnati stock exchange, covering approximately five hundred different stocks, listed on US exchanges, overseas antiseptic London and Hong Kong stock exchanges, having e-commerce, now, even on the most active trading days, they are no more excited, than a grocery store.
In the next five years, it is expected, as the New York Stock Exchange, and a consortium, led by the American Stock Exchange and the Chicago Board of Options, will move to 24/7 global electronic trading. New York Stock Exchange has already launched a program, which effectively bypasses its members using an electronic system, bringing buyers and sellers together, T. is. will provide the function, which has been performed by specialists for the last two hundred years. In September 1990 years, the simple confirmation of these plans for 24/7 trading made thousands of brokers and traders working in the hall tremble with fear, who clearly saw the sign before them. Many already feel unnecessary, because they see their salary, reduced due to the widespread taxation of contractual fees, even more reduced due to the automatic order execution system. Today to the clerk in Little Rock, Arkansas, in the office “Merrill Lynch” you just need to press a button, to buy ten thousand shares or twenty options directly from a specialist on the other side of the country, completely bypassing the services of a floor broker. Will it turn out trader overboard?
At the moment, traders are out of danger, and the hall remains one of the few places on earth – the last frontier, where there is still an opportunity for a high school graduate to start working as a courier, grow quickly to a clerk, make as much as one hundred thousand dollars a year and learn to trade, to finish work by my 25th birthday, having a multi-million dollar securities trading firm.
Not everyone can become a specialist, although many try. Some require a lot of hands-on trading experience. Others need to be tough., physically and morally. According to stock statistics, the average forty-one-year-old specialist spent twelve and a half years gaining experience in the floor trading and spent another four and a half years, working in some other sector of the securities industry.
However, the introduction of index options trading has accelerated the learning process.. I was told, what I will learn in six intense months of hard work as a clerk in a pit as much, how many in twelve years of work as a broker on the trading floor. They turned out to be right.
Index options trading has become trendy and has grown in volume much faster, than anyone on the stock exchange could expect. Stock indices are designed to protect investors, trading large portfolios. In this way, mutual fund managers, controlling large blocks of shares, use positions “sales” in stock index contracts as insurance against falling stock prices, just like farmers use cotton futures, to protect ourselves from falling cotton prices. And vice versa, investors, planning to buy shares in the future, can guarantee the price, by taking an index contract with a position “purchase”. One of the reasons for the unexpected success of the indices was the emergence of a new generation of speculators, willing to become or buyers, or sellers, depending on, as they thought, will there be shares, included in the index, rise or fall.
Like other stocks and options, index options are placed under the management of specialist firms. Everything, what is needed, to open such a company, are two or more traders, operators of certain stocks or options with a proven track record and a lot of capital. Compared to large, full-service firms, providing their clients with all types of services, such as research, sending monthly statements and investment seminars, specialist firms provide an absolute minimum of services. Everything, what are they doing, it is traded, and they do it very selectively.
According to the rules, the regulations and charter of the Exchange, a specialist firm is entrusted “conduct fair and orderly trade” And “buy or sell yourself, if there are no more buyers and sellers left on the market” the goods assigned to them. Our product was XMI, main market index (Major Market Index). Even if we wanted to, we couldn't take any other product, XMI has become so big during that time, when I worked for AMEX. And the exchange had to rebuild the XMI pit several times, to accommodate a growing number of people; by the time I left AMEX, the XMI pit occupied most of the northwest quadrant of the main trading floor.
Because of, that all their business is done in the hall or in the pits, and their staff has no investor relations, except through brokers transmitting orders, there is no need for specialist firms to maintain offices outside the exchange. This is why the investing public rarely hears about them.. (The only reason, according to which we had offices in the house 115 on Broadway, as well as on the Exchange, was that, what firm “Spear Leeds and Kellogg”, owning almost fifty percent of our company, set up its headquarters there.)
Most specialist firms tend to be very small, fiercely independent, determined to defend their territory and very profitable. In essence they do nothing., to gain fame outside the trading floor, but they are well known in the securities industry, since shares or options are attributed to them by the Exchange.
The role of the specialist emerged long ago with the explosive growth in stock trading during the speculative frenzy after the Civil War.. To 1869 Vice President of the American Stock Exchange (Curb Exchange) read aloud to the crowd of brokers gathered around him the complete list of NYSE stocks, traded on that day, quickly listing current bids (highest price, which they were ready to pay at that moment) and asking prices (the lowest price, at which they were ready to sell). He did this three times during the auction.. Broker, did not have modern electronic quotation boards and running “Rows”, to fill out orders, you had to wait for hours for the announcement of the name of a certain stock. One thing, when the broker was ordered to buy at the current price (market order), but in volatile times, many investors are hesitant to make price dramatic changes between order placement and execution, dictating upper and lower bounds on your buy and sell orders. With the advent of more and more share issues, brokers have no time to hang out waiting, and they began to transmit “limit orders” a new breed of sub-broker, which soon began to be called “Specialists”. To make their efforts worthwhile, broker, gym worker, shared his commissions with a specialist. Naturally, what, when new promotions appeared, the role of the specialist grew – like his strength, – and soon he took on the role of market maker. When in 1921 year, the Exchange moved to the premises, specialists instead, to communicate on the sidelines, began to gather at designated locations or “trading posts”, forcing trading partners to come to them.
To perform their functions as market makers, modern specialists must be united in four persons at once – often at the same time, times have become so crazy, – broker, Dealer, auctioneer and arbitrator.
As a broker, the specialist holds orders, which cannot be executed at the price indicated by the client until then, until the opportunity presents itself.
specialist, according to the rules of the exchange, must act as a dealer of the shares and options assigned to him. Doing this, he must risk the capital of the firm, buying and selling at their own expense there, where there is a temporary imbalance between buy and sell orders. To close the difference between bids and offers, specialist, trading at your own expense, may offer to buy at a higher price, than others agree, and sell at a price below, than all the others offer.
As an auctioneer, when the call rings, specialist sets the opening price for stocks and options. If you need to reopen due to suspension of trading, a specialist monitors and adjusts disparities in orders, setting new prices.
Experts are involved in every transaction, even if they do not participate from a financial point of view. This is how they work as arbitrators or on active days as police traffic controllers.. Someone has to separate the brokers, representing public and institutional orders, from traders, opening positions for their personal accounts. Priorities are usually set according to the principle “first came – served first”, “shouted first – heard first”. It is up to the specialist to monitor this cacophony and determine, who was the first, and who approves, what was the first. Although, according to the rules of the Exchange, specialists are not required to risk their lives and stop scandals, pulling apart the participating, they have the power to impose fines ranging from five hundred to one thousand dollars – with the approval of the official representative of the trading floor.
Managing a specialist firm on a sales floor can be very profitable, because you are in the perfect place, to respond to fast-moving news, often at the time of their fulfillment. This is balanced by the fact, that because of your vow “make markets”, risking the firm's capital, you can be destroyed in one day, which actually happened to a number of specialist firms during the October crash 1987 of the year. Unable to dispose of huge stocks and options in time or meet additional margin requirements, they were ruined by the unexpected free fall of the markets.
These traders are working in such a stressful environment., that on active days it is not surprising to see, how traders tear their position cards or grab the keyboards of their “Kvotronov” (computers, showing market data in real time) and run them into the terminal screen. I've seen, how one guy grabbed the whole machine and threw it on the floor.
Phones seem to be the most vulnerable to anger attacks: not a day passed, so that at least five of them are not torn off the walls or thrown through the trading post. Things got so bad, what was talked about, what firm “New York phone”, fed up with those, that she constantly had to replace devices, eventually, demanded from the Exchange, so that she herself bought them in bulk and herself performed the installation work. The Exchange now has its own army of assemblers in the hall, setting the order of repairing devices in the same way, how do military doctors do it, wandering the battlefield after the battle.
Imagine the scenery of a starship's conning tower “USS Enterprise”, handed over to the undisciplined fourteen-year-old owner of the world's largest designer “Ector”, Whose Father Cranked A Corner In The Video Monitor Market, and you will begin to imagine our work environment. Looking like an octagonal paddock away from the main trading floor, pit in reality – These are enclosed rows of raised tiers and rubber-covered platforms. They are separated by several aisles., leading to the main floor and hopelessly cluttered computer keyboards, Monitors, timers, trays for orders, heaps of phones, half-empty styrofoam cups of coffee, hundreds of unopened packages of foil ketchup and plastic soy sauce bags, empty soda cans, with insulated wire coils, plexiglass boxes, resembling hamster cages, piles of notebooks and mostly unused huge garbage cans and a couple of floor brushes standing next to the exit.
Wherever you go, you will stumble upon large metal pipes and beams, abounding in oddly sized video display and terminal screens – Our “Database”. Screens range in size from six-inch personal monitors to large whiteboards, available in most secondary schools or gymnasiums. The first impression of a friend who came to visit me was: “That's great! Just like a wall TV in “Siree”!” There were so many video monitors, piled up, seemingly, anyhow, what if you weren't looking down from the balcony, which runs along the main trading room AMEX, then it was impossible to see what was happening inside the pit. I guess, one could object, what did the managers of the Exchange want so, but then it is assumed, that they actually hired a space designer.
In fact, the pit grew out of a decorated trading post and, like the proverbial vine, maddened, consuming more and more area as the XMI volume increases. Changes were made as needed. The pit was initially littered with twenty or so fruit crates and cardboard boxes., thanks “Greenwich Gourmet Delhi”, which short traders and clerks used to get up on, to read broker icon numbers, when it was time to register transactions. These boxes for transporting fruits around the country could not bear the weight of people, jumping in and out of them, and therefore usually did not last more than one Day. The clerks were confused, when they stood on the box, honking furiously, and suddenly discovered, what have disappeared from sight, as the boxes broke one by one. The sight of this could also offend the manager's sense of decorum., as a spatial design consultant showed up one morning with a notebook, to ask us all kinds of questions, concerning our work habits. And soon the cardboard boxes were gone. In their place, carpenters built and installed wooden boxes., covered with industrial “non-sliding” coated in black rubber. We all fought for new boxes like tigers, foraging for their kittens – to our clerks. Must, to make them happy. Was, that this is the least of our problems.
Like a theater on Broadway, there was “scene” – in our case, a high platform, on which the specialists stood, looking across the crevice at the crowd of traders, located on a series of stepped rows. Between them, in the orchestra pit, there was a long passage, seemingly, left for an influx of brokers, who, during trading hours, entered and exited the pit like salmon during spawning. At least, this is how everything should have happened, as intended on paper. But that did not happen. Chaos is not the right thing, which adapts to the distribution of the sales area.
One thing went wrong almost from the start – carpenters invented this structure, based on drawings, not observations. Take care they watch us in action, understand human greed, they would immediately understand, what is more important, than a free overview along between traders and specialists, Were (and) the proximity between the two groups and (b) the need to be in voice contact with specialists, catch signals, filed by hand, eye movements, etc.. d. The problem was that, what, the higher traders and specialists were placed, the more the distance between them became. Communication failure has become a chasm, in which numerous hand-to-hand fighting took place. To prevent brokers from being besieged by a wave of angry traders, it took a long metal fence, similar to that, which can be found in every zoo next to polar bear cages. In reality, the analogy is not so far-fetched.. Before that, how was the fence built, poor brokers were literally crushed and pushed up to the other side of the pit by a crowd of angry traders. The last, pressing us, specialists, to the impromptu wall behind us, left us no choice, other than using your feet, to violently push these bodies back down. Those were the days, similar to the famous castle siege scenes in any of the half-dozen Hollywood epics. Thanks to all those thrown ketchup sachets, we even had “blood stains”, demonstrating our fighting qualities.
Noise reduction efforts have proven to be equally useless. “Walls” the enclosure was wrapped in thick industrial carpet, to muffle the godless combination of noises arising there. Over the roar of three hundred or so freaky traders, there was the beeping noise of monitors., a common broadcasting system and thirty telephones, whose pipes were continuously pounded at the end of the conversation. All at the same time.
Even before the opening bell, long before trading, the players did not hesitate in the means to achieve the goal so, to be recognized by the first specialists, standing on the podium slightly above them and looking through the bottom of the pit.
To take a position in the front row, the best way for X was to trick Y out of the hole.. This was often accomplished with a simple trick., arranged for Y, who was called, loudly announcing, from the front row – this was usually done by clerk X, two feet apart, using a wall phone. That very minute, how Y left, X slipped into an empty space and stayed there, without moving an inch. By then,, when the angry Y was returning to the pit, he found, that it is no longer possible to leak back.
In this kind of competitive environment, mistakes are inevitable., who can test the best of friendships.
On one particularly active day, my clerk wrote down, what i bought “fifteen option contracts at a price of thirteen and a half”, while the opposing trader yelled back, what did he sell me “fifty contracts of thirteen and a half”.
The difference between what was said “fifteen” and heard “fifty” led to misunderstandings in 47,250 Doll., which were to be taken out of one of our pockets the next day. Even more inconvenient was the fact, that the injured trader was a pretty handsome guy, with whom I had a date the night before, one of those rare occasions, when my limited lifestyle allowed me an evening of relaxation. Since the secretary of transactions, who stood next to me during the auction, also swore, what hear, as I said “fifteen”, my opponent had a hard time, when he was proving my mistake.
Each of us could have recourse to a courtroom arbitrator's decision or formal arbitration., that would hinder our promising romance. Furthermore, arbitration is a non-incentive alternative for the settlement of such trade disputes, because it can take many hours and cost both traders valuable time in the hall, often donating large sums of money, than the disputed amount.
Instead, we reluctantly agreed to share the loss. The pit was too noisy, so that anyone can hear everything for sure. My rival left with his copy of the deal disclaimer, but not before, what did you call me “first class bitch”. At least, he still thought I was first class. But not first class enough, to continue dating me. As a matter of fact, then he told me, what, whenever he looks at me, all, what could he think about, were lost 23.625 Doll.
Given the overwhelming number of young people compared to the handful of women in the gym, surprisingly how little happened in my time on the trading floor of the old, how is the world, docked. I suspect, the guys were either too busy, making big money, or too tired, to do something, except for light flirting.
I recognize, I had my share of fans, most of them were forgotten. A pleasant exception was my friend Roger Fenn from “Merrill Lynch”, real kind giant, taking a patronizing interest in me and supplying my catwalk with sweets. Returning once after one marketing presentation AMEX, he impulsively bought all fifty balloons from a street vendor for twenty-five dollars and handed them to me. Then he left on some business. While I was walking down the street, people came up to me and asked, are balls for sale. Naturally, I said: “Certainly”, and sold them all for two dollars a piece. One woman in the marketing department saw, how Roger bought them for me and was shocked by my impoliteness. “Good, Okay, – I said, – I'll tell him”. I did more than that. I handed him fifty dollars – half of the profits. He begged: “Hey yes well done!” Finally, a trader is a trader.
