What is a Trading Desk?
A trading desk is where transactions for buying and selling securities occur which is crucial to providing market liquidity. Trading desks are found in most firms that are involved in facilitating trade executions in markets such as equities, fixed income securities, futures, commodities, and currencies. A trading desk is commonly known as a dealing desk.
Understanding Trading Desk
Traders operating in the financial markets usually converge in a room known as the trading floor or trading room. The trading floor is made up of desks that share a large open space. Each desk, formally called a trading desk, specializes in a security type or market segment. Trading desks are where buying and selling of securities occurs on the ground floor. Before the 1970s, many banks split their capital markets business into many different department across several regions. These institutions began consolidating these departments in the 1970s following the launch of the NASDAQ, which required all investment firms to have equity trading desks. Today, many asset managers outsource their trading desks to these larger institutions.
Trading desks are manned by licensed traders who specialize in a given investment type, such as equities or commodities. These traders primarily use electronic trading systems and market makers to identify the best prices for their clients. The personnel on trading desks receive clients’ orders from the sales desk which is in charge of suggesting trading ideas to institutional and high net worth investors. In addition to trading activities, trading desks also help clients with structuring financial products, watching for opportunities, or supporting agreements between companies and investors.
Types of Trading Desks
The most common trading desks include: