Today is the 30th birthday of the S&P contract at the CME ($CME). Hard to believe it’s been that long. As a young college kid I used to visit my friend Orv Wilkin (ORV) on the floor. He was a trader at the exchange, and I was thinking about trying to get a job. Unfortunately, I had to actually make money in college and couldn’t afford to make $150 a week as a runner.
I recall the old pit opening up at the old CME building. It’s a health club now. There wasn’t any room to move, and because of the popularity of that contract and the interest rate quadrant there wasn’t any room to put people on the floor. The exchange instituted a hiring freeze. Thank goodness OSHA never visited there.
Five years after the contract started, we had the greatest one day crash in stock market history since 1929. Oct 19, 1987. Of course, the New York bankers blamed portfolio insurance and the futures contract at the CME. They wanted to ban the contract. The bankers wanted to ban it not because it was detrimental to the marketplace, but because it was providing more transparency to the market. The futures contract was tightening spreads in the cash market. Bankers were having to compete harder.
I remember working in the Eurodollars ($GE_F) all day that day. After our close at 2PM, Brian Brophy and I walked over to the edge of the S&P and watched. 8000 points lower on the day. Millions made and lost. The intensity of our day was overwhelming. Eurodollars normally traded in $25/tick increments. That day most of the quotes were in $250/tick increments. The day after the SPUs crashed, we opened up 350 points higher. Somehow we knew what we were witnessing was supremely historic.
After an intense investigation, people concluded that the market would have crashed even more if it were not for the S&P. The independent traders that stayed in the pit absorbed a lot of the selling that would have gone to the cash market. No one could get their orders filled in the chaos on Wall Street, but they found liquidity in Chicago.