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What is a Trading Desk?

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  • Written By: Rachel Burkot
  • Edited By: Bronwyn Harris
  • Last Modified Date: 21 September 2016
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    Conjecture Corporation
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A trading desk is a desk within an organization where the buying and selling of securities takes place. Companies that manage these desks include banks and other financial institutions. Examples of investments exchanged at trading desks are fixed-income securities, equities, futures, commodities and foreign exchange. Depending on the type of business where it is housed and the variety of exchanges that occur, a trade desk can be large or small.

Licensed traders who specialize in one type of investment, such as a commodity trader or stock trader, man the desks. The trades that occur take place instantly, which is important for day traders who seek financial opportunities that often do not last more than a few minutes. The day trading desk can help day traders make their exchange quickly and take advantage of the opportunity before it disappears.

Also known as a dealing desk, the primary function of a trade desk is to promote progressive and reactive pricing functions. Every exchange made in the stock market has a ripple effect. Trade desks are a good way to manage the transactions and their consequences. Above all, a trading desk provides a more solid, market-oriented method of making deals.

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The best prices are uncovered at a trade desk by electronic systems, phone brokers and market makers. The systems and brokers aid commission trades, while market makers display a bid and an offer for each transaction. The maker tries to make money on the price spread because most makers buy from the carriers and sell to the users.

A trading desk also manages price risk for both the business and the investors. Through buying and trading, price floors can be established, and premium can be collected by carriers who sell call options on their assets at a mutually agreed-upon price. Through such a transaction, the carrier protects his or her own assets while offering valuable products to clients.

Additional functions of a trading desk include acting as a pricing source, creating product structuring for businesses, assisting in marketing to the most valuable trading partners, watching for arbitration possibilities and supporting agreements between companies and investors. Before a trading desk is established, it’s important to consider individual company risks and risk-management systems in place already. Researching the market competition for buyers and sellers is also a good idea. Additionally, the trading desk should figure out the best way to offer new products with the potential for revenue. To establish a trade desk, take the company’s department that is responsible for managing pricing and trading, and consolidate these positions into trading desk jobs that form one pricing group.

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