What is pit trading?

Pit trading, also known as open outcry trading, is a traditional method of conducting transactions in financial markets. It involves a physical trading floor where traders gather in designated areas, known as pits, to buy and sell financial instruments such as stocks, commodities, and futures contracts.

Do commodity traders still use pit trading?

Over recent years, commodity traders still had the option of using pit trading or electronic trading platforms in several commodity markets, but that has changed. The Intercontinental Exchange, Inc. (ICE) futures exchange has increased its presence in recent years and it is entirely electronic — no pit trading.

Is electronic trading better than pit trading?

The old school thought is that pit trading is the most efficient form of price discovery, but it is hard to deny the benefits of electronic trading. So, which is better? Electronic trading offers much cheaper commissions for retail traders, and the transactions execute on a faster and more efficient basis than on the floor of an exchange.