Trading wikipedia
A trading room gathers traders operating on financial markets. The trading room is also often called the front office. The terms "dealing room" and " trading floor " are also used, the latter being inspired from that of an open outcry stock exchange. As open outcry is gradually replaced by electronic tradingthe trading room gets the only living place that is emblematic of the financial market. It is also the likeliest place within the financial institution where the most recent technologies are implemented before being disseminated in its other businesses. Trading rooms are also known as "trading labs" or "finance labs" in universities and business schools. Trading rooms, have become a key medium in creating a " wall street atmosphere". Everywhere, trading rooms are growing like small beans at schools,universities and finance institutions. By gathering these teams to a single site, banks want to ease: Trading rooms first appeared among United States bulge bracket brokers, such as Morgan Stanleyfromwith wikipedia creation of NASDAQwhich requires an equity trading desk on their premises, and the growth of the secondary market of federal debt products, which requires a bond trading desk. The spread of wikipedia rooms in Europebetween andhas been trading fostered by two reforms of the financial markets organization, that were carried out roughly simultaneously in the United Kingdom and France. In the United Kingdom, the Big Bang on the London Stock Exchangeremoved the distinction between stockbrokers and stockjobbersand prompted US investment bankshitherto deprived of access to the LSE, to set up a trading room in the City of London. Every emerging market segment raised the need for new dedicated trader positions inside the trading room. Brokers and investment banks set up their trading rooms first and large asset-management firms subsequently followed them. The business type determines peculiarities in the organisation and the software environment inside the trading room. Trading rooms are made up of desks, specialised by product or market segment equities, short-term, long-term, options…that share a large open space. Focusing on their customer relationship, they may deal on the whole range of asset types. Many large institutions have grouped their cash and derivative desks, while others, such as UBS or Deutsche Bankfor example, giving the priority to customer relationship, structure their trading room as per customer segment, around sales desks. One room in Paris may have traders paid for by the New York City subsidiaryand whose working hours are consequently shifted. On the foreign exchange desk, because this market is live on a basis, a rolling book organisation can be implemented, whereby, a London -based trader, for instance, will inherit, at start of day, the open positions handed over by the SingaporeTokyoor Bahrein room, and manages them till his own end-of-day, when they are handed over to another colleague based in New York City. Some institutions, notably those that invested in a rapid development RAD team, choose to blend profiles inside the trading room, where traders, financial engineers and front-office dedicated software developers sit side by side. The latter therefore report to a head of trading rather than to a head of IT. More recently, a profile of compliance officer has also appeared; he or she makes sure the law, notably that relative to market use, and the code of conduct, are complied with. The middle office and the back office are generally not located in the trading room. The development of trading businesses, during the eighties and nineties, required ever larger trading rooms, specifically adapted to IT- and telephony cabling. The teleprinter, or Teletype, got financial quotes and printed them out on a ticker tape. US equities were identified by a ticker symbol made of one to three letters, followed by the last price, the lowest and the highest, as well as the volume of the day. As early asthe Trans-Lux company installed the NYSE with a projection system of a transparent ticker tape onto a large screen. The trader juggled with handsets to discuss with several brokers simultaneously. The electromechanical, then electronic, calculator enabled him or her to perform basic computations. In the s, if the emergence of the PABX gave way to some simplification of the telephony equipment, the development of alternative display solutions, however, lead to a multiplication of the number of video monitors on their desks, pieces of hardware that were specific and proprietary to their respective financial data provider. From the early s trading rooms multiplied and took advantage of the spread of micro-computing. Along video monitors, left space had to be found on desks to install a computer screen. Though software alternatives multiplied trading this decade, the trading room was suffering from a lack of interoperability and trading. Video display applications were not only wrapped up in cumbersome boxes, their retrieval-based display mode was no longer adapted to markets that had been gaining much liquidity and henceforth required decisions in a couple of seconds. Traders expected market data to reach them in real time, with no intervention required from them with the keyboard or the mouse, and seamlessly feed their decision support and position handling tools. The digital revolution, which started in the late s, was the catalyst that helped meet these expectations. It found expression, inside the dealing room, in the installation of a digital data display system, a kind of local network. One calls a feed-handler the server that acquires data from the integrator and transmits them to the local distribution system. Reuters, with its TRIARCHTeknekron, with its TIB, Telerate with TTRS, Micrognosis with MIPS, soon shared this growing market. This infrastructure is a prerequisite to the further installation, on each desktop, of the software that acquires, displays and graphically analyses these data. Two software package families were belonging to this new generation of tools, one dedicated to Windows-NT platforms, the other to Unix and VMS platforms. The approach of these providers was to enrich their database and functionalities enough so that the issue of opening up their datafeed to any spreadsheet or third-party system gets pointless. This decade also witnessed the irruption of television inside trading rooms. Press conferences held by central bank presidents are henceforth eagerly awaited events, where tone and gestures are decrypted. The trader has one eye on a TV set, the other on a computer screen, to watch how markets react to declarations, while having, very often, one customer over the phone. The development of the internet triggered the fall of the cost of information, including financial information. It hit a serious blow to integrators who, like Reuters, had invested a lot the years before to deliver data en masse and in real time to the markets, but henceforth recorded a wikipedia of terminations of their data subscriptions as well as flagging sales of their data distribution and display software licences. Institutions with several trading rooms in the trading took advantage of this bandwidth to link their foreign sites to their headquarters in a hub and spoke model. The emergence of technologies like Citrix supported this evolution, since they enable remote users to connect to a virtual desktop from where they then access headquarters applications with a level of comfort similar to that of a local user. While an investment bank previously had to roll out a software in every trading room, it can now limit such an investment to a single site. The implementation cost of an overseas site gets reduced, mostly, to the telecoms budget. And since the IT architecture gets simplified and centralised, it can also be outsourced. But institutions have other requirements that depend on their business, whether it is trading or investment. Born during the same period, they share many technical features, such as a three-tier architecturewhose back-end runs on a Unix platform, a relational database on either Sybase or Oracleand a graphical user interface written in English, since their clients are anywhere in the world. Should the two parties fail to clearly understand each other on the trade terms, it may be too late to amend the transaction once wikipedia received confirmation reveals an anomaly. The first markets to discover electronic trading are the foreign-exchange markets. Reuters creates its Reuter Monitor Dealing Service in Contreparties meet each other by the means of the screen and agree on a transaction in videotex mode, where data are loosely structured. Its next generation product, an electronic trading platform called Dealingported on Windows, is launched in Like EBSwhich competes with it head-on fromit mostly handles spot trades. Several products pop up in the world of electronic trading including Bloomberg TerminalBrokerTecTradeWeb and Reuters Xtra for securities and foreign exchange. While the Italian-born Telematico MTS finds its place, in the European trading rooms for trading of sovereign-debt. More recently other specialised products have come to the market, such as Swapswireto deal interest-rate swaps, or SecFinex and EquiLend, to place securities loans or borrowings the borrower pays the subscription fee to the service. However, these systems also generally lack liquidity. Contrarily to an oft-repeated prediction, electronic trading did not kill traditional inter-dealer brokerage. Besides, traders prefer to mix both modes: screen for price discoveryand voice to arrange large transactions. Orders are subsequently executed, partially of fully, then allocated to the respective customer accounts. The increasing number of listed products and trading venues have made it necessary to manage this order book with an adequate software. Stock exchanges and futures markets propose their own front-end system to capture and transmit orders, or possibly a programming interface, to allow member institutions to connect their order management system they developed in-house. But software publishers soon sell packages that take in charge the different communication protocols to these markets; The UK-based Fidessa has a strong presence among LSE members; Sungard Global Trading and the Swedish Orc Software are its biggest competitors. In program trading, orders are wikipedia by a software program instead of being placed by a trader trading a decision. More recently, it is rather called algorithmic trading. It applies only to organised markets, where transactions do not depend on a negotiation with a given counterparty. A typical usage of program trading is to generate buy or sell orders on a given stock as soon as its price reaches wikipedia given threshold, upwards or downwards. A wave of stop sell orders has been largely incriminated, during the financial crises, as the main cause of acceleration of the fall in prices. However, program trading has not stopped developing, since then, particularly with the boom of ETFsmutual funds mimicking a stock-exchange index, and with the growth of structured asset management; an ETF replicating the FTSE index, for instance, sends multiples of buy orders, or of as many sell orders, every day, depending on whether the fund records a net incoming or outgoing subscription flow. Such a combination of orders is also called a basket. Moreover, whenever the weight of any constituent stock in the index changes, for example following an equity capital increase, by the issuer, new basket orders should be generated so that the new portfolio distribution still reflects that of the index. If a program can generate more rapidly than a single trader a huge quantity of orders, it also requires monitoring by a financial engineerwho adapts its program both to the evolution of the market and, now, to requirements of the banking regulator checking that it entails no market manipulation. Some trading rooms may now have as many financial engineers as traders. The success of an algorithm therefore measures up to a couple of milliseconds. This type of program trading, also called high-frequency tradingconflicts however with the fairness principle between investors, and some trading consider forbidding it. However, the manager does not need to revalue his in real time: as opposed to the trader whose time horizon is the day, the portfolio manager has a medium to long term perspective. In most countries the banking regulation requires a principle of independence between front-office and back-office: a deal made by the trading room must be validated by the back-office to be subsequently confirmed to the counterparty, to be settled, and accounted for. In Continental Europe, institutions have been stressing, since the early s, on Straight Through Processing STPthat is, automation of trade transmission to the back-office. Their aim is to raise productivity of back-office staff, by replacing trade re-capture by a validation process. Publishers of risk-management or asset-management software meet this expectation either by adding back-office functionalities within their system, hitherto dedicated to the front-office, or by developing their connectivity, to ease integration of trades into a proper back-office-oriented package. Anglo-Saxon institutions, with fewer constraints in hiring additional staff in back-offices, have a less pressing need to automate and develop such interfaces only a few years later. On securities markets, institutional reforms, aiming at reducing the settlement lag from a typical 3 business days, to one day or even zero day, can be a strong driver to automate data processes. As long as front-office and back-offices run separately, traders most reluctant to capture their deals by themselves in the front-office system, which they naturally find more cumbersome than a spreadsheet, are tempted to discard themselves towards an assistant or a middle-office clerk. An STP policy is then an indirect means to compel trading to capture on their own. Banking regulation tends to deprive traders from the power to revalue their positions with prices of their choosing. However, the back-office staff is not necessarily best prepared to criticize the prices proposed by traders for complex or hardly liquid instruments and that no independent source, such as Bloomberg, publicize. The term is often wikipedia to refer to the liabilities and odds setting departments of bookmakers where liabilities are managed and odds are adjusted. Examples include internet bookmakers based in the Caribbean and also legal bookmaking operations in the United Kingdom such as William HillLadbrokes and Coral which operate trading rooms to manage their risk. The growth of betting exchanges such as Betfair has also led to the emergence of "trading rooms" designed for professional gamblers. By using this site, you agree to the Terms of Use and Privacy Policy.
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