Open Outcry trading method was the primary and very popular method for communicating trade order in the pits till 2010. First of all, for those who are new, we would like them to know – Open Cry is a trading method used by traders and sales professionals on a trading floor.
An Open outcry trading method was considered to be the most basic trading method that happens to execute on trading floors before e-trading origination. In Outcry trading, traders make a contract when one trader wants to sell at a specific price and another trader wishes to buy at that same price.
It is a communication method between professionals on a futures exchange or stock exchange, generally on a trading floor. Under the outcry trading method, traders use hands as a signal or shouting to convey information typically about buying and selling orders. Along with buying and selling orders, they also waive arms and shout verbally to bring attention to their offers and bids, etc.
These hands and verbal signal communication are now rarely employed due to the introduction of faster and more precise electronic trading systems.
Open Outcry Trading Method Steps
An open-outcry method takes 4 steps for the successful execution of a trading order. These steps placed are as follows:
➤ Bidding and Offering
➤ Informal contract creation
➤ Listing of the deal
➤ Agreement and Concession of the deal
Let us understand more about the outcry trading method process in detail.
- Bidding and Offering: Under the outcry method, trader commute trading info by shouting verbal bids, using hand for a signal, or waving arms to attract the trader’s attention.
- Informal contract creation: Contract comes into existence when the first trader announces a price for which an asset would be sold and another one is accepting the price to buy at the announced price.
- Listing of the deal: When a deal is made, seller and buyers are hardly 20-30 feet away, both dealers list the trade separately.
- Agreement and Concession of the deal: Once the deal has been done and confirmed, both parties clear the report from their end to the clearinghouse.