Trading pit – what’s that?

In an old-fashioned exchange, there will typically be a specific area designated for trading with voice and hand signals. To improve visibility, this area is normally a several-tiered octagon, hence the nickname pit.

trading pitThe pit will be filled with brokers who are there to carry out sell orders and purchase orders that they have received from their respective clients. Prominently displayed badges and the color and pattern of each trader’s jacket will show each broker’s brokerage affiliation.

In other parts of the exchange building, there will be clerks available to receive orders from clients (e.g. by phone). When an order has been received by a clerk, a runner will run to the trading pit, locate the correct broker and transmit the information.

Today, the traditional trading pit has largely been replaced by electronic trading. Still, the trading pit – filled with frantic brokers shouting out loud and signaling each other – remains a powerful symbol of the stock exchange.