Trading Desk

What Is a Trading Desk?

A trading desk is a physical location where transactions for buying and selling securities happen. Contingent upon the type of financial institution, the trading desk might be filled by traders trading for their own proprietary account, brokers who act as agents matching purchasers and venders, or some combination of both.

Trading desks are found in most financial firms that are engaged with facilitating trade executions in markets like equities, fixed income securities, futures, commodities, and currencies. These facilities are vital to giving market liquidity.

A trading desk may likewise be known as a dealing desk.

Figuring out Trading Desks

Traders operating in the financial markets generally join in a room known as the trading floor or trading room. The trading floor is comprised of desks that share a large open space. Every desk, officially called a trading desk, has practical experience in a security type or market segment. Trading desks are where buying and selling of securities happen inside a financial institution.

Before the 1970s, many banks split their capital markets business into a wide range of divisions across several districts. These institutions started merging these divisions during the 1970s following the send off of the NASDAQ, which required all investment firms to have equity trading desks. Today, numerous asset managers re-appropriate their trading desks to these larger institutions.

Trading desks are monitored by licensed traders who have practical experience in a given investment type, like equities or commodities. These traders essentially utilize electronic trading systems and market makers to distinguish the best prices for their clients.

The faculty on trading desks receive clients' orders from the sales desk, which is in charge of recommending trading thoughts to institutional and high-net-worth investors. As well as trading activities, trading desks likewise assist clients with organizing financial products, looking for opportunities, or supporting agreements among companies and investors.

How Trading Desks Work

Trading desks produce an income by charging a commission on trades they transact. For instance, a hedge fund may deal through an equity trading desk at an investment bank and pay a humble fee for each trade. Now and again, brokers might operate their own trading desk by being the counterparty for their client's trades. These trades might very well never come to the interbank market and may remain inside the bounds of the merchant's own liquidity pool.

There are a wide range of types of trading desks, it being traded to rely upon the security. Frequently, these desks are isolated and might be situated at certain central exchanges.

Types of Trading Desks

Some common trading desks include:

• Equity trading desks handle everything from equity trading to exotic options trading.
• Fixed-income trading desks handle government bonds, corporate bonds, and different bonds and security like instruments that pay a yield.
• Foreign exchange trading desks work with trading in currency pairs by acting as market producers. They can likewise participate in proprietary trading activities.
• Ware trading desks are centered around agricultural products, metals, and different commodities, for example, crude oil, gold, and coffee.
• Derivatives trading desks represent considerable authority in derivatives, like options, futures, advances, and swaps.

Every one of these sectors can be additionally partitioned. For example, fixed income is an exceptionally broad category and can deal with anything from super safe U.S. Treasuries to super unsafe, poor quality company bonds — otherwise called junk bonds. Larger investment banks might partition their trading desks to spend significant time in smaller categories inside these fundamental sectors.

Many brokers likewise offer trading desks for their clients, particularly in the foreign exchange market and equity day trading market. With the ability to quickly execute trades, these brokers set themselves separated from different brokers acting as delegates. Most large financial institutions have their own trading desks in place to help their internal groups and outside clients in setting orders.

Highlights

• A trading desk is a designated space inside a financial firm where trading activity happens.
• Trading desks are regularly segmented by asset class or security types, like those having some expertise in equities, fixed income, forex, commodities, as well as derivatives.
• Trading desks are occupied by experts, going from proprietary traders to office just brokers.