Open-outcry is a public auction system where communication is by shouting and hand signals between traders. This type of trading is most commonly found where bonds, options, futures, and commodities are traded. Some common auction markets that use the open-outcry system are: Chicago Mercantile Exchange (MERC), New York Mercantile Exchange (NYMEX), London International Financial Futures and Options Exchange (LIFFE), and the Singapore Exchange (SGX).
In these pits, the traders' shouts and hand signals form a complex network of communication that may seem uncontrolled and chaotic, but which is, in fact, remarkably orderly. This is known as open-outcry. The open-outcry system of trading is similar to hundreds of auctions going on at the same time. Stock trading on the trading floor appears manic. Yet traders are communicating with a special language as they yell and wave their arms. Traders use a series of hand signals and a type of verbal shorthand to indicate whether they're buying or selling and at what price. They yell because they need to be heard in the loud, competitive environment of the trading floor. The yelling and arm waving that occurs on the floor represents the purest example that exists of a competitive free market - buyers and sellers meeting face-to-face, negotiating price.