A trading à la mode Forex gathers traders operating on financial markets. The trading room is also often called the front office.
Tradingrooms 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”. The spread of trading rooms in Europe, between 1982 and 1987, has been subsequently fostered by two reforms of the financial markets organization, that were carried out roughly simultaneously in the United Kingdom and France. 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. Trades negotiated by market-makers usually bear standard terms. Sales make deals tailored to their corporate customers’ needs, that is, their terms are often specific. 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 Bank, for example, giving the priority to customer relationship, structure their trading room as per customer segment, around sales desks. Some large trading rooms hosts offshore traders, acting on behalf of another entity of the same institution, located in another time-zone. One room in Paris may have traders paid for by the New York City subsidiary, and whose working hours are consequently shifted.
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. Telephone and teleprinter have been the broker’s first main tools. The teleprinter, or Teletype, got financial quotes and printed them out on a ticker tape.
As early as 1923, the Trans-Lux company installed the NYSE with a projection system of a transparent ticker tape onto a large screen. This system has been subsequently adopted by most NYSE-affiliated brokers till the 1960s. During the 1960s, the trader’s workstation was remarkable for the overcrowding of telephones. The trader juggled with handsets to discuss with several brokers simultaneously. The electromechanical, then electronic, calculator enabled him or her to perform basic computations. From the early 1980s trading rooms multiplied and took advantage of the spread of micro-computing. PC world and the Unix world.
Though software alternatives multiplied during this decade, the trading room was suffering from a lack of interoperability and integration. 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 1980s, 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.
Incoming flows converged from different data providers, and these syndicated data were distributed onto traders’ desktops. Reuters, with its TRIARCH 2000, Teknekron, 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.
However Bloomberg and other, mostly domestic, providers, shunned this movement, preferring to stick to a service bureau model, where every desktop-based monitor just displays data that are stored and processed on the vendor’s premises. 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 wave of terminations of their data subscriptions as well as flagging sales of their data distribution and display software licences.
Moreover, the cable operators’ investors lead to a huge growth of information capacity transport worldwide. Institutions with several trading rooms in the world took advantage of this bandwidth to link their foreign sites to their headquarters in a hub and spoke model. And since the IT architecture gets simplified and centralised, it can also be outsourced. Indeed, from the last few years, the main technology providers active on the trading rooms market have been developing hosting services. From the late 1980s, worksheets have been rapidly proliferating on traders’ desktops while the head of the trading room still had to rely on consolidated positions that lacked both real time and accuracy. But institutions have other requirements that depend on their business, whether it is trading or investment. Such processes require mutualisation of data.