Investment Banks have to have a robust structure in place to handle the huge volume of trades that are processed daily. Investment Banks are the key players in the forex markets, so just how is a 200 man trading floor set up to work efficiently?
There are typically five different rings or banks of desks:
1. Spot Traders
In the middle are the spot traders. Trading the volatile spot of the major currency pairs and crosses they are the first to react to any news or economic data coming out as order books are quickly filled.
2. Forward and Options Traders
The knock on effect of any movement from the spot traders is instantaneous as the second ring containing the forward and options traders react as the impact of the underlying spot fx starts to affect the derivatives markets.
3. FX Sales
The third ring houses the fx sales teams and the bank’s propriety traders. Following the news, Bank clients are now starting to phone through to trade. The fx sales teams are very specialised; for example one team may deal just with hedge funds, one team with Scandinavian Corporates and one with Contract for Difference or CFD firms.
4. Technical Analysts and Economists
Next we come to the desks with the Technical Analysts and Economists; there is no trading here and subsequently more time to digest the news away from the noisy spot desk.
5. Infrastructure Support
Finally on the peripheries of the trading floor we have the infrastructure staff including IT support and telecoms engineers to ensure the sophisticated systems do not go down.
There you have it, a snap shot of a professional Trading Floor set up.
Written by Chris Gillie
Chris Gillie is the founder of Axcess FX, a forex software review and research website. He is a former investment banker who worked in FX Sales on the UBS London trading floor. Chris has been using forex trading software as part of his trading set-up since the late 2000s and the embryonic days of MetaTrader and the MQL coding language.