Futures Pits Get Poor Marks in Investor Survey

CHICAGO —  A survey of investors in the futures markets revealed nearly one-third believe that the trading pits do not operate with “honesty and efficiency,” but a vast majority say the federal probe into alleged fraud in the pits has not changed the way they do business.

The survey of roughly 1,000 investors was undertaken by discount brokerage firm Lind-Waldock & Co. to gauge the impact of a two-year undercover investigation by federal agents at Chicago’s two huge futures exchanges. The industry is still awaiting federal indictments 14 weeks after the investigation was first publicized.

More than 4,000 of the Chicago-based brokerage firm’s customers were mailed a questionnaire, and 31% of those who returned it said they do not believe the trading pits at the exchanges generally operate with honesty and efficiency.

But only 20% said the federal probe had changed the way they trade.

Open Outcry Favored

Over a two-year period, FBI agents disguised themselves as traders. They secretly tape-recorded conversations and allegedly witnessed fraudulent trading practices in some of the busy pits at the world’s two largest futures exchanges, the Chicago Board of Trade and the Chicago Mercantile Exchange.

Of those surveyed, 63% answered that the exchanges did not do a satisfactory job of policing themselves but should not be subjected to more government regulation.

Seventy-eight percent said the current system of open outcry for executing trades served them well.

Only 12 investors out of 1,078 surveyed said they had stopped trading as a result of the government probe.

Comments elicited from investors covered topics ranging from the prospect of losing market liquidity because of the inquiry to the usefulness of computerized trading as an alternative to the yelling and hand signals now used to transact business in the boisterous pits.