Futures For You by Carley Garner
What is “side-by-side” trading and what does it mean to me as a speculator?
A majority of futures contracts now offer side-by-side trading in which speculators have a choice between open outcry and electronic execution venues. If you are unfamiliar with these terms, “open outcry” is the original method of execution for the futures and options industry and is also referred to as pit trading. Pit traded contracts are bought and sold by traders in a tiered area, normally shaped in an octagon, waving and yelling orders to buy or sell an instrument. You’ve probably seen glimpses of the process on television or in movies. Do you remember the orange juice trading pit in the movie Trading Places? The practice is loud and exciting and best described as organized chaos.
“Electronic execution,” on the other hand, doesn’t involve a physical and centralized location. Instead, it is the exchanges’ method of matching buy and sell orders via electronic means with little or no human intervention.