Traders who staged a walkout at the Chicago Mercantile Exchange got little support from the market’s top officials during a meeting Monday, said an organizer of the protest.
Independent trader David Stein, who works in the Eurodollars pit, was involved in a walkout that slowed activity Friday morning. They were angered by the exchange’s acceptance of large “block trades,” privately negotiated deals that bypass the open outcry auction market.
Stein said he and like-minded independents, known as “locals,” met for about 90 minutes with executives of CME Group Inc., parent of the Merc and the Chicago Board of Trade. The executives were “steadfast” in their view that block trades aren’t harmful and are an important business source for the exchange, Stein said.
“I’m shocked that the exchange doesn’t care that their customers might not be getting the best price,” he said.
“They were pretty adamant in their position that if they don’t do it, some other exchange will,” Stein said. He said he’s not sure what traders might do next to dramatize their concerns.
CME leaders in attendance included President Phupinder Gill and Chief Operating Officer Bryan Durkin, Stein said. The exchange would not comment on the meeting.
Block trades are governed by exchange rules, which require that they command “a fair and reasonable” price, and must be reported after they are executed. CME Group markets the service to firms that want to pay one price for a large transaction.
Stein said that both buyer and seller pay brokers who handle block trades, whereas they’d be paid only by one side if the order went through the pits. So he said the broker’s interest often varies from the customer’s.
The Friday morning walkout was over by noon and involved about 70 traders, Stein said. Participants said the trigger was a block trade in Eurodollar options the exchange approved Thursday.