The sound and the fury TO THE casual observer, a trading pit lacks the quiet elegance of an electronic exchange.
Floor traders shout, jostle and shove.
And they even claim that this mayhem produces more efficient markets. They may have a point. In a paper prepared for this week s conference of the European Finance Association in London, Joshua Coval and Tyler Shumway, of the University of Michigan Business School, argue that noise levels may help floor traders to detect market swings minutes before they take place. This creates a buzz around the pit a few minutes before information hits the market. When the need to trade is less urgent, floor traders make do with simple hand signals, which require less energy and are less likely to alert their competitors.