The 'Merc' of Tribeca

Traders in the 1950s, when trades in precious metals dominated the Merc’s business.

If you had been strolling along Hudson Street near Harrison on a hot summer afternoon in the days before air conditioning, you might have heard a steady rumble of voices in the air and, now and then, loud shouts and yells. It would have seemed unlikely in the normally quiet neighborhood. Looking up, you would have found that the noise was coming from the open windows of the handsome New York Mercantile Exchange, on whose huge, two-story trading floor many thousands of dollars’ worth of commodities from butter and eggs to potatoes to dressed poultry were changing hands every day.

Today the building is quiet, the Exchange having moved out in 1977 to larger space in the World Trade Center (and then to still larger quarters in Battery Park City). But in its heyday, the Merc, as the Exchange was known, was one of the city’s principal economic engines and a vibrant, heady world unto itself.

It was founded in 1872 by dairy merchants anxious to standardize the wholesale trade of their goods in the booming post-Civil War city. Known at first as the Butter and Cheese Exchange of New York, it initially occupied rooms in a building at Greenwich and Chambers streets owned by a sugar refining firm. The location, close to the docks, was a good one. And already those docks were handling a formidable amount of foodstuffs: by 1873, New York’s butter and cheese wholesalers were receiving (and selling) $100 million annually in dairy produce, much of it traded in the Ex­change. At that rate the Greenwich Street digs soon proved inadequate. So in 1882 the Exchange, now dealing in groceries, canned goods and poultry in addition to butter, eggs and cheese, changed its name to the New York Mercantile Exchange and bought land at the corner of Hudson and Harrison streets for a new building.

To make sure their new structure would be suitably imposing, the Merc’s leadership hired Thomas R. Jackson, one of the city’s leading architects. He did not disappoint them. His six-story brick-and-granite building, which opened in 1884 and incorporates elements of both the Queen Anne and the Romanesque Revival styles, is a virtual symphony of round arches, classical columns, deep-set windows and fancy brickwork, the whole topped by a mansard-roofed tower. Inside, the large two-story-high trading room on the second floor was outfitted with elegant cast iron columns, elaborate mosaic floor and tiles, mahogany woodwork and sumptuous brass fixtures. Even today, with many of its fittings long gone, the room remains one of the most impressive interior spaces in the city.

For several decades butter, eggs and cheese remained the Merc’s main commodities and were generally traded for cash. In the early days bids and offers, shouted out from the floor, were entered on large blackboards manned by pairs of clerks—one right-handed and the other left-handed so that they could work together without obscuring traders’ views. Clerks learned to identify traders by the sound of their voices so that they would not have to turn around to see them. Later on, pit trading was introduced and traders gathered around a big brass ring to cry out their bids, which were recorded by a clerk seated in the center.

Over the years, however, cash transactions that dealt in existing produce gave way to futures transactions in which traders contract to buy or sell items that will come into existence months or even years later. The Exchange also began to handle other foods besides dairy produce—potato futures were introduced in 1941, onion futures five years later.

A major departure came in the 1950s with the advent of futures in platinum, the first of a host of strategic materials that would in due course come to dominate the Exchange’s business. Silver, gold and oil trading followed in the 1970s, by which time dairy products had shrunk to minor items in the Merc’s overall picture.

But while the Merc was putting in­creasing emphasis on exotic substances, even in the 1970s it was an informal place. Gary Lapayover, who started out as a page in 1973 and rose eventually to vice chairman, says, “Back then you knew everybody. It was a very friendly place. Today that’s impossible.” The pace of business could be very uneven, with long stretches when nothing much happened. “There were no rules against smoking,” says Lapayover. “Lots of men would smoke big cigars, and when trading would suddenly pick up the guys would have to put down their cigars in a hurry. There were ledges on the iron columns in the middle of the floor, and when things got hectic I would see whole rows of stogies parked there.”

The Exchange had no training program; you learned on the job. George Henderson, who came to the Exchange right out of high school back in those days, is quoted in a Merc commemorative book as saying, “I had no clue what a commodities exchange was. They put a jacket on me and they put me up on the slow boards but I had no clue what was going on. Everything was on-the-job training. You sat next to somebody who walked you through what you had to do.” Michel Marks, who arrived in 1973 and subsequently rose to become chairman, recalled that “the first couple of days, when the bell rang and everybody started yelling and screaming, I thought it was the funniest thing I’d ever seen… Most people were introduced through family. Nobody ever studied commodities in college.”

By the mid-1970s it had become clear that the beloved Harrison Street building was obsolete—not only too small but unadaptable to technological change.

By coincidence, as the Exchange prepared to move to the World Trade Center it also went through a crisis that almost wrecked it. In 1976, for a number of reasons, the bottom dropped out of the Maine potato crop and growers were unable to deliver some 50 million pounds of potatoes on which almost 1,000 futures contracts had been written at the Merc.

At such times in well-run exchanges traders would be compensated for the default, but the Merc found its reserves insufficient and it came close to expiring.

Luckily, energetic younger members like Michel Marks took over and revamped the organization, and slowly it recovered. Today, it is booming. Traders—much younger on the average than the ones who held forth in the old building—deal not only in gold and platinum but in copper, natural gas, crude oil and gasoline, among many other substances, and the Merc is the largest energy and precious metals trading exchange in the world. On its trading floor some 1,000 contracts are bought and sold each minute of the day.

That’s a far cry from Harrison Street.

For more Oliver E. Allen stories from Tribeca's past, read “Tribeca: A Pictorial His­tory,” available at Amazon.com [1].