Last Updated on 3 November, 2022 by Samuelsson
What is a Trader desk?
Trader desks are desks in financial institutions, banking, and trading firms that traders use to trade stocks, bonds, futures, and other securities. A trader desk is where trades are executed. It houses a team of traders, each with their workstation, desktop computer, and multiple monitors.
What are trading instruments traded at a Trader desk?
A Trader desk will trade all the major types of securities, such as futures contracts on individual stocks and indices, options on individual stocks and indices, and warrants on entire stock issues. Futures contracts on commodities such as gold and silver are also traded at the Trader desk. Bonds, equities, foreign exchange instruments, and over-the-counter derivatives are also traded.
What are the Types of trading desks?
There are many trading desks in a financial institution or trading firm. The type of trader desk can be determined from the type and value of securities being traded.
Some popular types of trader desks are:
1. Equity Trading Desk
A trading desk that trades mainly stocks and bonds. Equity traders are usually also in charge of allocating capital to new products as they are launched.
2. Commodity Trading Desks
A trading desk mainly trades commodities such as gold and silver or agricultural products.
3. Fixed Income Trading Desks:
A trading desk trades mainly government and corporate bonds, U.S agency bonds, mortgage-backed securities, credit-default swaps, and bond futures contracts.
4. Foreign Exchange Trading Desk:
A trading desk trades currency futures and spot foreign exchange (in the form of currency conversion).
How do trade desks make money?
Traders at a Trader desk make money by taking a position in the client’s account and trading the client’s margin deposits. A Trader desk charges a fee for each trade executed on their desk, and these fees vary depending on the size of the trade. A long trade executed in a single second cost more than a trade executed over days or weeks.
What equipment is needed on a trading desk?
A Trader desk needs a computer and telephones as it will use these as much as the traders themselves. The computer and phone are essential as they will be used to place orders on the market, communicate with clients and other traders, receive information, log information, and calculate and report data. They need to communicate with many other bank units or brokerage firms (e.g., internal communication companies such as Datacomm) to transmit data back to them. The desk needs an efficient way to transfer and store data. The desk needs a high-speed internet connection, and a computer network is essential.
7 Ways to build the perfect trading desk setup
1. Aim for maximum view
The best traders have to have good environments if they are to be productive. If you can afford it, go big with your desk space – the more room, the better. Rather than squinting at your screen from an uncomfortable distance, you’ll want some elbow room. Plenty of monitors come in handy, too.
2. Have everything within reach
When you’re busy trading stocks and managing risk, every second counts; if you’re constantly grabbing a pen or a calculator, it can add up fast. Aim for maximum convenience with your trading desk setup. The less time you spend on items, the more you have to make trades.
3. Invest in Powerful Equipment
You don’t need to spend a fortune on your computer rig. But having a decent setup can give you an edge over the competition. A fast processor, plenty of RAM, and a high-quality monitor can help you make the most of your time in front of the screen. Computers used for trading often differ from those used at other companies as they need to be powerful enough to handle intense calculations and multiple data streams. The quality of monitors is also very important. If you have a lot of monitors working simultaneously, it is a must to have at least six monitors. Also, another important thing is the sound quality. You need to be able to hear all the information being displayed on your screens.
4. Stay organized
If you’re going to hire help, they’re going to be around you all day anyway. Get as much space as possible for your desks and keep everything as neat and ordered as possible to minimize distractions and maximize efficiency.
5. Get a good chair
Many traders live in the same position, so they know what they like. Most people prefer a high seat with armchairs that elevate their arms to reduce strain and provide them with better access to keyboards and mice. A good chair should be adjustable to avoid back pain problems and lightweight so you can stay mobile while trading.
6. Help is available
As a company, traders are often left alone in their cubicles with only their computer screens. While this is great for efficiency, it can also cause problems. A good trader desk should allow occasional distractions and pauses, but not too many. The right desk setup will provide the right balance of work and space to encourage productivity without hindering it.
7. Having Strong Internet Connectivity
You will need a dedicated internet connection. If you are trading online, you must have a fast and reliable internet connection. Also, for your trades to be executed seamlessly without any hitch, you need a strong internet connection to compensate for any slowdowns that may occur elsewhere in the system.
What are the major advantages of a trading desk?
Trading desks have the following advantages:
- Increased Execution Speed: A trader wants to buy a certain option. It will be processed faster when routed through a trading desk rather than an electronic order going straight to an investment bank.
- Reduced Risk: If a trade goes wrong, the trader on the other end of the deal can put in a stop loss and take the position off immediately. Even if something unexpected happens, they will no longer have any capital at risk.
- It gives financial institutions a competitive advantage over other firms, with less sophistication and more money to trade, as well as greater access to information and better systems.
- Reduced Paperwork: Traders can eliminate most paper-based administrative procedures rather than dealing with accounting departments and check-writing staff.
- Generate Internal Revenue: The desk can generate income through commissions and fees. They will also handle their fee payments rather than having to send money off to another part of the company.
- Greater Control Over Strategy: A trader has more freedom to execute trades and decide on the number of shares they want to buy/sell. They can also use option market makers as a source of liquidity and get increased control over their trading strategy.
- It is possible to trade a range of products with very little work. This reduces the amount of education required on the part of the traders. It is also possible to use small and large screen monitors, which give traders larger monitors with more information at their disposal to trade ideas and execute trades on a timely basis.
- It reduces the firm’s operating costs by having traders work in a small working environment with less staff.
Conclusion
By understanding the basic functions of a trading desk, you can see that it is a powerful tool that can benefit everyone working in the financial industry. Make sure to take the time to set up your desk properly before moving forward and start making trades with confidence.
Newer traders should be wary of slippage and ensure they have enough capital to trade their positions. With this said, having a dedicated trading desk is extremely important if you plan on being an active trader, as you will need all of these tools if you want to succeed.