Chana R. Schoenberger –
NEW YORK – It’s difficult to miss Jeanette Schwarz Young as she trades coffee futures and options at the New York Board of Trade. At the downtown Manhattan exchange, traders must wear either blazers or colored jackets with their floor passes and trading names attached. The 5-foot-4-inch tall Schwarz Young sports hot pink and lime green jackets with animal print lapels, emblazoned on the back with the moniker “Option Queen.”
Schwarz Young, who also trades contracts on sugar, the dollar and several Russell indices, and her colleagues on the exchange floor are bucking the automation trend as they furiously ride commodities up and down. Although other exchanges are slowly switching to electronic trading, the NYBOT still has 987 floor traders who argue over prices in person. Business is still done with frantic hand signals. Traders mainly record orders on paper slips, although some, like Schwarz Young, have switched to wireless PDAs hooked up to the clearinghouse’s computer.
The brokers’ services are in more demand than ever. Commodities are enjoying a popularity surge recently as hedge funds and institutional investors look for places to invest that aren’t tied to the stock market. $140 billion is parked in funds that are long on commodities, driving several NYBOT products, including coffee, cotton, cocoa and financials, to new volume highs. Coffee and oil are the most volatile commodities.
The exchange saw a record volume this year, with 31.7 million contracts traded. In 2005, traders will volley some 40 million contracts back and forth, says Joseph O’Neill, NYBOT senior vice president. To keep up with demand for new commodity products, this spring the NYBOT launched futures and options trading on wood pulp and sugar-based ethanol.
Schwarz Young’s mornings at the exchange start before 8 A.M., when she goes over her technical charts to see what prices coffee and her other commodities are likely to hit that day. She files a look-ahead TV spot for a foreign-exchange news Web site, then wanders through the NYBOT’s huge green-paneled trading floor, exchanging tips with other traders before each commodity opens.
On the floor, a series of circular pits flanked by semicircular amphitheaters mark the spots where each commodity and its attendant options are traded. Every trader has an assigned place to stand in each pit in which he trades. Around the pits sit traders’ cubicles, festooned with children’s school pictures and good-luck charms, as well as hand-sanitizer dispensers to guard against germs that fly across the room when the traders yell orders. Brokers tend to be hyperactive, quantitative numbers geeks, Schwarz Young says: “A floor trader is any juvenile delinquent who was way too bright to sit still in class.”
There are two kinds of traders on the NYBOT floor. Those who execute orders for clients make up 60% of the brokers. The rest are “locals,” like Schwarz Young, who trade their own money. Anyone can trade on the exchange once they buy or lease a seat–typically for $300,000–and go through broker training.
A native of Weehawken, N.J., which sits just across the Hudson River from Manhattan, Schwarz Young rated her first stock at the age of 12 when her father, a surgeon, felt that his stockbroker was swindling him and asked her to check up on his holdings. An early winning pick was a company called Youth Dynamics, which she advised her father to sell. “I read their annual report and discovered that it produced nothing,” she recalls. After Adelphi University, where she studied math but graduated with a degree in speech, she became a speech pathologist with a master’s degree.
She later turned to stock analysis, working for Thomson McKinnon Securities and a succession of small securities firms. In 1986 she bought a seat on the NYBOT and began trading as an “upstairs” broker, calling down to the floor to get her orders filled. She moved down to the trading rings in 1997. Schwarz Young is one of a dozen women floor brokers and says trading offers plenty of opportunity: “There’s absolutely no glass ceiling.”
Although coffee is her favorite commodity to trade, Schwarz Young is not a coffee aficionado. “I fell into coffee because I like the way it charts,” she says. Many of the investors in commodities similarly don’t care what the underlying product is. The exception is companies hedging risks in their own goods. Starbucks (nasdaq: SBUX), Kraft Foods (nyse: KFT), Procter & Gamble (nyse: PG), Nestlé (otc: NSRGY.PK) and Sara Lee (nyse: SLE) all hedge in the coffee futures market, and Hershey (nyse: HSY) does so in cocoa.
If more exchanges go the way of the New York Stock Exchange, which recently announced plans to merge with electronic trading platform Archipelago Holdings (nyse: AX), there may soon be no need for floor traders. Until then, Schwarz Young can be found in the futures pits, screaming for orders.