by: Chris Stucchio

In the good old days before the computer revolution, stocks were generally priced by traders using pencil and paper. Analysts would read news, study corporate financials, and then give ideas to traders. Trading happened in a physical trading pit. When a large player (Goldman Sachs, J.P. Morgan) wanted to buy a large block of shares, they would hire a pit trader to trade on their behalf..

The pit trader would be told to buy a bunch of shares of GOOG at the best price he could. Before electronic trading, order flow was determined by price-height priority. If a trader is really tall, you are more likely to notice that he wants to fill your order. Similarly if he was loud, had a bright jacket, or was otherwise noticeable. Those days were far more civilized than our modern system of price-time priority and electronic markets, or at least that’s what Michael Lewis wants us to believe.

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