Pit Trading Vs Electronic Trading : NobleTrading Blog

Tuesday, July 24, 2007

Pit Trading Vs Electronic Trading

Pit trading and electronic trading are the two major methods of trading used by traders trading financial products. Pit trading also known as floor trading is the trading of stocks or futures manually in the exchange floor, known as Pit. It was the main type of trading until late 1990s. But the introduction of electronic trading of stock and futures have certainly lowered the popularity of pit trading and now more and more pit traders are moving to electronic type.

Electronic or online trading of stock and futures holds much more advantages than pit trading as,

No need of extensive physical strain.
Faster order entry and execution.
Ability to trade a number of exchanges.
Choice of order routing destination.
Ability to trade multiple products simultaneously.
Instant market data as charts and instant news.
Access to advanced trading programs integrated with powerful analyzing tools.
Speedy access to account details.
Even broker independent trades.

But still floor trading is practiced quiet extensively and in some markets like S&P, the pit trading volume is much larger than the electronic trading volume. Some exchanges and investment firms are looking to build much larger trading floors. Today, electronic pit trading is also available in some markets.

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