What are these people, who you may have seen at least in a movie scene or video, shouting at each other with nervous expressions and gestures in a stock market building, what are they actually doing? We simply explained.
Even though we don’t know much about it, there are some images that we come across frequently.. large group of people like crazy in a big space on the ground floor of a stock market building waving their arms and shouting at each other, Wherever you look, tension-filled images are one of them. This image appears frequently, especially in movies and TV series. Sometimes in the news…
What we know about these people who seem quite stressed is that they are interested in money and stocks. mundane things like buying and selling looking at screens where numbers turn green and red. If you’re more proficient in finance, that’s different, but I’ll explain by imagining you’re someone who doesn’t know much about these things.
First of all, who are these people?
The people you see in this photo who look a little nervous and agitated are interested in trading options, futures or stocks; working on following the markets and making the right trade at the right time. consists of traders and brokers.
Brokers make money with commission per transaction by following the market for their customers and executing their transactions, while traders are those who make direct buy and sell transactions and can earn profit or loss as a result of this transaction.
All together in a ‘pit’…
These people are us images that make you feel like you’re in a war While being caught, they are actually doing their job as usual. I’m assuming this is what you call normality; let me explain.
We can say that these images we see are actually a kind of special communication language adopted in stock exchanges since the 17th century. what to do using certain hand signals for steps such as transaction type, price, quantity. and they manage the process by supporting it with voice communication, which often includes shouting. The gathering of a lot of people trying to do all these things in a momentary and correct way creates these images that seem chaotic to us.
In this system, which is called ‘Open Outcry’ and translated as ‘open auction’ in our language, brokers and traders are on the trading floor of the stock market. In areas called ‘pit’ in English they trade, create their offers and complete the process.
However, as these trading processes are carried out live and there are hundreds of people around for similar transactions, as you can imagine. There is also competition. This can cause loud noises and tension.
this much you can liken it to an auction run by auction. For example, after a trader declares that he wants to sell a certain stock at a certain price, another trader who says he will buy it at that price declares this and then these traders complete the process by making a contract. These processes of declaring that he will sell and saying that he will receive it are also mentioned. expressed with some hand signals.
If there is an intent to sell showing the hands away from the body with the palms facing outward movement is made. This means that that person is open to offers for the stock to sell. On the contrary, if there is a purchase intention. palms facing the body mark is made.
Where the fingers touch indicates the amount of the transaction. For numbers from 1 to 9 touching the chin when the amount is a multiple of 10 forehead is touched. For multiples of 100, the forehead is touched with a fist. Many such hand signals are accompanied by voiced statements.
This system is actually like a ‘dying tradition’ now.
Although it is an iconic system that has been used for hundreds of years, it is no longer human. There are computers that do this much faster and cheaper. With the digitization of transactions, the number of exchanges and companies that have made the open tender system in these ‘pits’ has been decreasing in the last few decades.
Many of the most important and iconic exchanges today are now running digitally and this chaotic environment no longer exists. In the 2010s, their numbers gradually decreased. But anyways There are also places where the system continues. Moreover, there are those who argue that it should continue. It may sound a little crazy, but they have their own logical reasons.
They summarize the advantages of this extremely tiring and suffocating system as follows;
- Seeing each other, this group that carries out the transactions, enables them to obtain more ‘private’ information about the transaction through various data such as facial expressions, facial expressions and tone of voice. More specifically, traders and brokers seek out emotions such as greed and fear that cannot be seen in electronic trading, and make inferences about the transaction.
- It also offers advantages such as noise heard and movements seen in the ‘pits’, monitoring the movements of the market, calculating its volatility.
The disadvantages are more as you can understand from the system’s evolution to digital;
- Since there is no place restriction in e-commerce, there is access from anywhere.
- While transactions are completed with a few clicks in seconds in electronic commerce, communication efforts are in question between minutes and large crowds in open auctions.
- Finally, everything is recorded in electronic commerce. This is a great opportunity to avoid common problems such as incorrectly kept notes and lost papers.
As a result, I think it would not be wrong to say that a tradition that we do not have much chance to encounter anymore and which is about to be buried in the dusty pages of history with digitalization. Of course, this tradition has been around for hundreds of years. We have made too much money to count. If we think about it, we can say that it is a tradition that will always be talked about…
Resources: Investopedia, Business Insider, Corporate Finance Institute, Information and Communication Technologies Glossary