Trading Floor Dynamics

Demetri Papacostas and Francesco Tonin

Modern trading floors are a thing of the past, to paraphrase the famous adage by Oscar Wilde. This rings true when we examine how historically the sell side (banks and broker–dealers) developed a functioning sales and trading operation. If you have ever visited a bank trading floor, you will know they have had an open floor layout for many decades. There are no cubicles, no individual desks. It was an open plan, open outcry environment before open plan ever became fashionable across other work environments. However, the traditional bankers, the people that make the loans, were always in offices and their analysts in cubicles around the relationship manager’s office.

The main reason why corporate finance bankers have offices and traders have open trading floors is that bankers need privacy. The transactions they work on operate behind information barriers (previously referred to as “Chinese walls”), and often the individuals are required to sign a statement to “cross the wall” to participate in a transaction. On the other hand, traders need to communicate prices to their salespeople and other traders, and these prices need to be as efficiently accessible as possible. Therefore