Thirty years ago, working on a trading floor, of either a stock exchange or a bulge bracket bank, involved working in a bustling pit of bankers, where brokers and traders in brightly coloured jackets called out their buy and sell requests in a system known as open outcry.
Throughout the 1980s and the 1990s the trading floors converted to electronic trading, replacing the ecosystem of yelling and hand signals with computers, algorithms and desk-based traders buying and selling through sophisticated trading software. So what is it really like to work on a trading floor today? We spoke to a senior trader in a City bank to get a first-hand view of what his day involves…
"I get onto the trading floor for 7am every day. My markets open at 8am and I like to read the overnight market commentary from the US and Asia, as well as checking on any moves in other markets overnight which may affect my opening positions. I sit on a desk of ten people who each trade products in different European currencies.
There are two major types of trading which I do throughout the day – market making, which is when I make a market (a buy and sell price) for a client who wants to buy or sell at a certain rate, and ‘prop trading’, which is when I go out into the market and trade on the profits previously made to try and increase revenue.
My role involves understanding, at a macro level, the different factors which can impact the value of a currency and interest rates – political stability, employment rates etc. I then use this to determine the fair value of the currency at any given time, as well as the likely future value in both the short, medium and longer term.
This current market knowledge and future market hypothesis allows me to make a decision on the price at which to buy or sell which, all things going well, allows me to then buy or sell at a lower or higher level further down the line.
I am busy trading with other banks through our brokers, throughout the day. A trader typically has phone lines out to 40 different brokers and there is constant noise throughout the day as brokers are calling for prices. There are roughly 500 traders and sales people working on our floor and so it is constantly buzzing with noise!
The nature of trading is a very intense, demanding role which requires an ability to make split second decisions based on a sound understanding and often gut feel
The markets close at 4pm and I spend the final couple of hours of the day booking my trades in the various systems we use and writing market commentary for our clients – other financial institutions or private banking clients – to inform them of the days trading flows, propose trading ideas and make recommendations.
The nature of trading is a very intense, demanding role which requires an ability to make split second decisions based on a sound understanding and often gut feel of how a market is currently behaving and how it is likely to behave in the future.
The rewards can be significant – calling the market right can be incredibly lucrative, and likewise, getting it wrong can be deeply frustrating."