US traders are learning to adapt to the world’s biggest work-from-home experiment
If someone told the world a few months ago that armies of Wall Street traders were going to leave their crowded, noisy trading floors for the comfort of their very own living rooms, no one would have believed it. Yet, here we are, four months into a pandemic that shows little signs of regress, witnessing the world’s largest trading from home migration.
Ever since the unfortunate 9/11 events, Wall Street giants have started developing plans to keep operations running in the case of natural disasters, terrorist attacks, or unforeseen circumstances. However, most of these plans were more focused on moving personnel to backup locations, rather than considering the possibility of working remote.
Trading from home on such a massive scale has never been done before, so it was simply never considered by trading firms until now. That’s because remote trading comes with numerous disadvantages, some harder to tackle than others, so Wall Street companies need to explore ingenious ways to replicate the trading floor at home.
Goldman Sachs, leading global investment company, is experimenting with bringing teams in the same virtual room by setting up special video conferences that are supposed to run all day long. Traders would have special cameras installed at home, together with large screens so that they can stay in contact with colleagues. But this only solves one point on the list of remote trading challenges.
The financial world is a highly complex system with lots of pieces scattered across the world. Stocks, bonds, and currencies, all worth trillions of dollars, are bought and sold by thousands of companies, including banks, asset managers, hedge funds, brokers, and trading specialists, either for themselves or for their clients. Technology has been the best ally for these companies, as they constantly invest in elaborate setups meant to streamline communication between analysts, trading desks, and their clients. In such a heated environment, even half a second matters, as prices can change in the blink of an eye.
Traders are used to having three to four screens they keep a constant eye on, to monitor price changes, communicate with trading partners, and analyze market data. At home, most of them are stuck with no more than two screens where they try to fit every window they need, and it often becomes a challenge.
Taken individually, inconveniences are somewhat minor, such as missing the help of the infamous Bloomberg keyboard or struggling with keeping the chat window open at all times. But when all of these small annoyances add up, their impact on the functioning of markets is noticeable and has been observed by regulators, traders, and investors alike.
The finance industry is a fast-paced environment, where anything can happen in a split second, and when you add market volatility on top, you need fast and strong answers. Adjusting to a new environment made communicating decisions takes longer than before, which slightly slowed down the market, despite efforts to keep things going as normal as possible.
Missing the trading floor
Trading floors are designed to simplify the work of traders as much as it is technologically possible, which is close to impossible to replicate at home.
For stock markets, where prices are provided in real time, and traders can act upon them at any moment, but for over-the-counter markets such as bonds, prices are frequently negotiated during each particular trade. On a typical trading floor, this can be done very fast, by pressing a button, but when you are working from home, it involves a lot of instant message exchanges and phone calls, which takes much more time. By the moment you are done, prices can fluctuate, and decisions need to change.
Traders are accustomed to the so-called “turret” phones, which are particular telephones with preprogrammed keys, to help traders connect with clients or trading partners in an instance. There are, of course, means to set up something similar at home, but the options are not nearly as effective.
Investors and traders are not the only ones observing these changes. Government officials, which are responsible for monitoring the good functioning of financial markets, have also noted that slower connections have created delays which are leading to uncertainties.
Meeting compliance requirements is yet another challenge that bankers, investors, and traders have to face. To avoid issues, traders need to use recorded lines, and many have restrictions on using their personal mobile phones for communicating with clients or trading partners. Because no one ever saw working from home as an option, these lines have not been optimized for home offices.
For everything to work as it once did, you’d have to completely rebuild the trading floor in each and every trader’s home. However, because precautions need to be taken in order to stop infections from spreading, some trade-offs need to be made.
Despite challenges, business is booming
Times of financial uncertainty are never easy for the trading world. As people fear their assets may have to suffer, they start trading more, in an attempt to anticipate market trends and continue to make profits. Equity volumes have doubled in March, with some companies even reporting their business is up 50%.
The forex market has also experienced a boom, considered by many to be the safe haven of this ongoing crisis. The pandemic managed to bring back something that was starting to miss from the market – volatility. Volatility attracts high-risk investors, which are now looking for ways to expand their portfolio and tips for trading forex with high leverage. This puts even more work in the hands of traders, but it does not mean they are not happy to see the market thriving as it used to.
The contrast between the real economy and the stock market is sometimes hard to understand, but can’t be denied. For the US stock market, this last April was the market’s best month since 1987, despite ongoing economic issues around the globe. Could this mean trading from home can turn into a viable solution? Well, not as it is right now, but with proper plans in place, one can surely see something on those lines happening in the future.