CME and Cboe are clearing trading floors as coronavirus spreads, and one veteran trader thinks the millions they'll save will be too good to ever reopen the iconic pits
- Options exchange operators are shuttering access to physical trading floors to help limit large gatherings and combat the spread of the novel coronavirus, COVID-19.
- Jon Najarian, a veteran options trader and CNBC commentator, thinks that could be a step towards permanent closure of the iconic pits.
- Najarian said the exchanges might be hard-pressed to reopen trading floors after recognizing the cost savings from shutting down the trading floors.
- Physical traders still play an important role in managing liquidity and volatility, he said while speaking on a webinar hosted by alternative data marketplace BattleFin.
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A veteran of the options space believes contingency plans put in place shutting down access to trading floors in light of the coronavirus could be what finally proves that the iconic pits have no place in a world dominated by electronic transactions.
Jon Najarian, a former professional footballer who went on to build a career as an options trader and CNBC commentator, said exchange operators could be unlikely to reopen the trading floors after recognizing the cost savings from shuttering spaces as Wall Street looks to put plans in place to protect against the novel coronavirus, COVID-19.
CME Group announced Wednesday it would temporary close its trading floor at the end of this week. Cboe Global Markets followed suit on Thursday.
"They may never reopen because they look at that and say, 'Look, if we can handle it electronically, we can make $10 million more a year. We don't have to heat, air condition. We don't have to add security guards and all the rest," Najarian said while speaking on a webinar hosted by alternative data marketplace BattleFin on Thursday. "If they shuttered these floors - and these are for-profit ventures - they'd make more money."
A CME Group spokesperson cited the exchange operator's announcement on the closing of the trading floor, which states its reopening "will be evaluated as more medical guidance on the coronavirus becomes available."
A Cboe spokesperson declined to comment.
The years of the majority of trading taking place in-person are long gone, as electronic trading has taken over most markets. However, the trading floors that have remained have come into the spotlight, as large events and gatherings are being cancelled as a measure to combat coronavirus.
The Wall Street Journal reported Thursday the New York Stock Exchange is prepared to implemented a contingency plan that would include shutting down its trading floor.
And while many have dismissed exchanges' trading floors as no longer an essential part of how markets operate, Najarian dismissed the idea. Specialists on the trading floor still play a critical role in helping to manage liquidity and volatility, he added.
"I don't think we are quite ready for no traders on the floor," Najarian said. "I think we get exaggerated moves when we have fewer and fewer intermediaries."
On Wednesday, Business Insider reported that Intercontinental Exchange, the parent company of NYSE, was closing its London office, the home of its European futures business, for the remainder of the week after an employee tested positive for coronavirus.