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A pit is a designated area, at an open-out-cry exchange-trading floor, where transactions concerning a specific contract type are done. The majority of pits are either polygonal or circular platforms with one or more concentric rings of steps dropping towards the center, hence “pit.”
For futures contracts, each underlying (for example, a particular commodity) is traded in a different pit and, in each pit, traders of a given delivery date are grouped on a specific area.
For the nearby contract, that is often the topmost steps of the pit. This is convenient, not only because this tends to be most actively traded contract (and top steps are larger) but also because top steps are closer to phone desks of the futures commission merchants.
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Less frequently, pits are divided into slices, like a pie, in which case the trading of different delivery dates is located in different slices of the pit. For purpose of ticker or wallboard display, bidding information is collected by exchange employees in a pulpit, usually located on the fringe of the pit.
At one pit, one can find people with various roles: general employees of the exchange, out trade clerks, market reporters, runners, arbitrage clerks, phone clerks, deck holders and exchange member traders.
Out trade clerks are employees of the brokerage firms and exchange members in charge of solving inconsistencies in trades from the previous day each morning before the beginning of the standard trading hours.
Market reportrs are employed by the exchange and their job at the pit is to report and process price information. Runners, arbitrage clerks, phone clerks, and deck holders are employees of various member firms or individual brokers.
Runners carry orders and other information to the brokers. Arbitrage clerks use hand signs to communicate trading information from the pits to the phones. Phone clerks are on the phone at workstations around the pit and deck holders hold orders for the traders.
Depending on the exchange and their role in the pit, different traders and staff use jackets of different colors, to help identifying themselves. For instance, at the Chicago Mercantile Exchange (CME), there can be jackets of at least five different colors in each pit.
Dark blue jackets are used by general employees at the exchange, out trade clerks wear green jackets with panels on the back, individuals with light blue jackets are market reporters and the yellow jackets are runners, arbitrage clerks, phone clerks, or deck holders.
Members supplied by the exchange use the traditional trading red jacket; however, some traders also have jackets specially designed and with unusual patterns, to increase their visibility within the trading pit.
