Exchange rules dictate that personnel on the trading floor must wear jackets and ties, but business attire is not tailored to the physical demands of the trading pit. Trading can get ugly sometimes, and nice clothing can get ruined easily. So the trading jacket was developed as a lightweight, loose-fitting alternative in which a trader may move more freely.
Almost everyone wears a special-color jacket. Floor managers wear Kelly green lab coats, and runners wear light blue. Some traders wear brightly colored jackets to attract attention. They may need to grab someone's eye during hectic trading activity, and the color may be enough to do the job. In some cases, jackets of a particular color indicate traders are affiliated with a particular company. Some member brokerage firms have large floor staffs. In practice, all the staff from the same brokerage firm wears the same color jackets, which sometimes also bear the company name or logo, in much the same manner that sports teams wear uniforms. This helps the staff find each other on the crowded trading floor. The jackets also help for easy recognition during active trading.
Independent traders often wear trading jackets in colors of their own choosing or they sometimes wear the same color of jacket as that of the member firm that clears their trades.