The Big Apple And the Second City: Two Trading Towns United, Part II

By Tony Huck, Chief Executive Officer, Score Priority

As I mentioned in my last post, these past few months I’ve been thinking about the market’s evolution during the course of my career, an exercise brought upon by the rapid changes we’re seeing all around us as we figure out both the reopening and our new normals. 

Most of my career has mirrored the flight path of a jet flying the O’Hare to LaGuardia route. So, my thought process surrounding these decades of increasingly intertwining equity and derivatives markets centered around the relationship between Chicago and New York. I left off establishing the two cities’ market foundations: two different trading cultures centered around different asset classes. A post mortem of the 1987 crash in the L.A. Times about the growing relationship between the two cities put it thusly: 

“From the days when they swapped stock certificates in swallow-tailed coats, the traders of Wall Street have tended to see their counterparts in the farm-bred Chicago markets as muddy-booted parvenus and gamblers. The Chicagoans, in turn, have seen themselves as the standard-bearers of a vigorous free-market capitalism and sometimes knocked Wall Street as a staid preserve of privilege.”

When first reflecting, I was focused on the differences between the cities — styles of trading, types of market participants, sports, asset classes, and the like. But as I marched through my memories, more and more kept coming back to ever-growing connectivity. Between NYSE’s electronification (see the DOT system) alongside the rise of Nasdaq, paired with the Chicago debut of stock index futures in 1982 and stock index options in 1983, the magnetism between the two cities’ markets in retrospect feels inevitable. So much came about because of the world of arbitrage opportunities and trading strategies which developed around that connectectivity.

In order for those early, electronically-enabled trading opportunities to stay profitable, a level of technological innovation was needed. What was hard to imagine then was the speeds this connectivity would reach. A lot of us have phone monkey as a resumé line item — that was speed back then, that was our go-to connectivity. Just think, in the ‘80s there were exchanges that banned those newfangled things we call computers on the floor! 

But the genie doesn’t go back in the bottle. That ended up meaning handhelds did become ubiquitous on all floors, that exchange colocation developed, that GUIs and FPGAs entered the fray, that people tunneled through mountains to lay shorter fibre routes(!). Now, it’s reached the point that firms use microwave towers and are exploring low-orbit satellite networks for faster trading. 

Closer together, second by sliver of a second. 

(It also means that at any given moment the number of people screaming “What’s the market?!” is some miniscule percentage of what it was in those telephonic heydays.)

My point is that while different geographic regions will have their distinctive flavors, traditions, and allegiances, technology has brought Chicago and New York’s trading communities closer together, and the shared interests, commonalities, and needs that breeds are what I am focused on. All of us are threads in the fabric of markets and we’d be well served to remember that. 

Oh, and the tech also means I can ping a buddy halfway across the country and in an instant know what they’re doing for lunch. As I learned from my last post, the Billy Goat is still an option! 

The Big Apple And the Second City: Two Trading Towns United, Part II first appeared on LinkedIn.