Futures 101

>> A look at the Montreal Exchange's trading floor

by PHILIP PREVILLE

To the uninitiated, watching a trading floor is like watching a boat sink: people are screaming, gesturing and jockeying for position--yet no one is jumping ship. In order to really understand what's going on, just think of it as a great big game of pick-up hockey.

Final factoid: Who wins this game of mayhem? Who the hell knows? Many red badges are simply paid for every transaction they broker, regardless of whether it's a money-winner or a money-loser. For the black badges and the luxury boxes, there's much more on the line. Since December 1999, the Montreal Exchange only trades in futures and options. On Tuesday alone, the total value of all transactions on this futures-only trading floor was estimated at around $30 billion. :

1. Desks such as these are arranged like arena seats all around the trading floor. They're actually like luxury boxes, only better: they're owned by companies like Nesbitt Burns and CIBC World Markets, and they're not just spectators--they're taking calls from clients, and giving buy and sell orders to the traders on the floor.

2. In this daily game of financial shinny, the Montreal Exchange has a simple job: they provide the rink (the trading floor), the referees and scorekeepers (all seated in a row here),and scoreboards with updates from other "games" around the world (the screens above the refs).

3. The scrimmage takes place on the trading floor and, not surprisingly, most traders look like failed NHL recruits: young, big, loud and full of machismo. These two traders are wearing red badges, which means they are go-betweens who only take orders from the luxury-box people, communicating by means of hand signals. In this case, both traders are signalling that they are prepared to buy 50 contracts by holding five fingers to their foreheads.

4. This gentleman is wearing a black badge, which means he's in there spending his own money. The black badges basically yell at the red badges, telling them what price they're willing to buy or sell at; the red badge will then relay the information to the luxury boxes.

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