Steve Beitler has made his career on the CME trading floor, so JLN interviewed him for the Open Outcry Traders History Project. Beitler shared his story and at the end had some biting words about electronic trading and who benefits from it.
When Beitler was growing up, he imagined he would follow his father into the textile business, but he wanted to be a tennis pro. Today, he does not even play tennis anymore, but there was a time he did play junior tennis in the New York area with his current business partner Tom Murphy.
It was that connection, which Beitler and Murphy realized they had as adults when they were working for the bank that would become HSBC, that would lead Beitler to Chicago to work with Murphy.
Murphy and Beitler established a business on the floor of the CME in the early days of interest rate futures, trading Eurodollars and CDs for customers.
Beitler bought his first membership in 1986-87, an IOM, and upgraded to a full CME seat after making some money.
Beitler said the thing he would change is he would have pushed his partner Murphy harder to buy a CME seat so they could have become a CME clearing firm, which would have given them a better financial position.
His most lasting memories of being on the trading floor were the day of the crash in 1987 and 9/11. His worst memory was 9/11.
The economic opportunity of the trading floor was the great equalizer, he said. It was all about how hard you worked and your street smarts and how you apply them, he said.
His best day on the trading floor was when he convinced a customer to make a huge trade and it worked out great and the customer made millions of dollars. Beitler made $150,000 and was amazed by it.
His worst day on the trading floor was having a bad error and compounding it by trying to leg out of the trade instead of just getting out of the trade.
Beitler grew up in the markets in the 1980s when interest rates were higher, so he said he always thought interest rates would go higher, making him wrong for the last 15 years, until most recently.
He said he learned to trade options at Marine Midland Bank, which became HSBC. Working on the trading floor at the CME helped him understand it more and more, he said, because you had to.
Beitler said he tended to stay away from market openings and let the market open and then work customer orders. Given the large customer orders he was trying to get filled, this helped him manage customer expectations about what it would cost to get the orders filled, he said.
Beitler would not pull punches when it came to the broker groups who were filling his orders. He was direct and forceful about what it took to earn and keep his business.
Beitler said the Eurodollar pit was clear, without any shenanigans, because of the size of the orders. He heard stories about problems with other trading pits, but never saw that in the Eurodollar pit because of the sheer size of the orders and the opportunity they presented.
Traders were generous, giving people opportunities and helping people in need, Beitler said.
Electronic trading benefited the exchange and those players who developed electronic trading systems to replicate locals, while taking no risk, Beitler said. Customers trading electronic markets are not getting the fills they were getting when it was open outcry, he said, noting that slippage is much higher.
Electronic trading has been negative for customers and brokers, he said. The cost of doing business has not gone down, it has gone up dramatically, Beitler said. He said the exchanges have benefitted as they monetized the changes and so have a couple of trading firms with lots of money that have developed the technology to scalp the markets risk free.