Financial Jargon Buster Dictionary

This glossary is provided for information only and is not regulated by the Financial Services Authority.

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Floor

The trading area where securities are bought and sold on an exchange.

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

Examples of markets which use this system in the United States are the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, and the Chicago Board Options Exchange. In the United Kingdom, the London Metal Exchange still makes use of open outcry.

The open outcry system is being replaced by electronic trading systems (CATS and Globex). 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.

A "trading floor" is a trading venue. This expression often refers to a place where traders or stock brokers meet in order to buy and sell equities, also called a pit. Sometimes, the expression "trading floor" is also used to refer to the "trading room" or "dealing room", i.e. the office space where market activities are concentrated in investment banks or brokerage houses. But, technically speaking, these two spaces are different.