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A trading room is where buy and sell orders are executed in financial markets. Traders aim to make a profit through short-term changes in market prices. Trading rooms can be located in brokerage houses or investment banks, and some thrive outside of major cities. Transactions are carried out electronically or verbally, and trading rooms are often noisy with multiple screens and TV broadcasts. Exchanges are where orders are executed, and some are completely electronic. Trading rooms may be dedicated to a particular asset class, and traders earn fees and compensation based on trades and prices.
A trading room refers to the office space where buy and sell orders are carried out in the financial markets. The professionals who carry out those orders are called traders, and their job is to try to make a profit through short-term changes in market prices. A trading room can also be referred to as a trading floor, and many of these offices are located within brokerage houses, some of which are part of the largest investment banks located in major cities around the world. E-commerce, which is based on the use of computers and other technological devices, has also made it possible for some trading rooms to thrive outside of major cities.
A robust trading floor is often filled with hundreds or thousands of individual traders, each of whom has multiple computer screens on their desks to monitor trading activity in the financial markets. Transactions are carried out electronically, such as by computer or verbally and by telephone. Typically, a trading room is a noisy office space with television screens set up for traders to listen to the latest financial market broadcasts on the trading channels. When a stock is mentioned on commercial television, there is usually immediate buying or selling activity in that stock, which traders will try to capitalize on.
Exchanges are where buy and sell orders are actually executed, and contain a trading room where trades are made by live specialists and brokers or where electronics are used to facilitate orders. A trading room full of live specialists is known as an open protest system. In this system, traders rely on hand signals to communicate trading details, such as how much of which security to buy or sell, with each other.
Some exchanges, including the Nasdaq in New York, are completely electronic, relying almost entirely on computers to run the exchanges. Electronic commerce has removed some of the human element involved in commerce. As brokerage houses and stock exchanges adopted this faster method of trading, thousands of traders lost their jobs. Hybrid exchanges, including the Euronext New York Stock Exchange, a merger between two of the largest exchanges in New York and Paris, have a combination of an electronic and an open system.
Trading rooms on large exchanges may be dedicated to a particular asset class, such as stocks, bonds, or commodities. Financial transactions are monitored by the regulatory agency for financial markets in a particular region. Traders often earn fees and compensation based on the number of trades they make, and also based on the price for which securities are bought and sold.
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