Open outcry

Open outcry is the name of a method of communication between professionals on a or futures exchange typically on a trading floor. It involves shouting and the use of to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.

In an open outcry auction, bids and offers must be made out in the open market giving all participants a chance to compete for the order with the best price. New bids or offers would be made if better than previous pricing for efficient price discovery. Exchanges also value positions marked to these public market prices on a daily basis. In contrast, over-the-counter markets are where bids and offers are negotiated privately between principals.

Since the development of the stock exchange in the 17th century in Amsterdam, open outcry was the main method used to communicate between traders. However, this started changing in the later half of the 20th century, first through the use of telephone trading and then starting in the 1980s with electronic trading systems.

As of 2007 few exchanges still have floor trading using open outcry. The supporters of electronic trading claim that they are faster, cheaper, more efficient for users, and less prone to manipulation by market makers and broker/dealers. However, many traders advocate for the open outcry system on the basis that the physical contact allows traders to speculate as to a buyer/seller's motives or intentions and adjust their positions accordingly. As of 2010 most and futures contracts are no longer traded using open outcry due to the lower cost of the aforementioned technological advances.

Since the 1980s the open outcry systems have been being replaced by electronic trading systems (such as CATS and Globex).

Floor trading is the meeting of traders or at a specific venue referred to as a trading floor or pit to buy and sell financial instruments using open outcry method to communicate with each other. These venues are typically or futures exchanges and transactions are executed by members of such an exchange using specific language or hand signals. During the 1980s and 1990s phone and electronic trading replaced physical floor trading in most exchanges around the world.

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