Investment Banks are the main players in the Forex Market. Deutsche Bank is the largest, with a market share of 10.89% of Forex global trading volume according to the annual Euromoney FX survey followed by UBS and JP Morgan.
Investment Banks have to have a robust structure in place to handle such a huge volume of trades that are processed daily, so just how is a 200 man trading floor set up to work efficiently? This directly relates to my experience working at UBS which in the early 2000s had one of the largest Forex trading operations and was in the top five in volume traded.
A Typical Setup Of Five Different Rings Or Banks of Desks
A Forex trading floor in a large Investment Bank operation is typically made up of different banks of desks often strategically positioned emphasizing their sensitivity to the overall operation.
1. Spot Traders
In the middle are the spot traders. Trading the volatile spot of the major currency pairs and currency crosses they are the first to react to any market news, geopolitical event 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 specialized; for example one team may deal just with hedge funds, one team with Scandinavian Corporate clients and one with Contract for Difference (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 and work on trade recommendations and forecasts for Investment Bank clients 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 telecom engineers to ensure the sophisticated systems do not go down, or if there is downtime it is extremely limited in nature.
There you have it, a snap shot of a professional Trading Floor set up!
For further information on what a trader at an Investment Bank does including Forex, we think the below video by the Institute of Trading called “What a Trader At an Investment Bank does” is well worth 15 minutes of your time. It provides for a broader overview beyond the scope of this short but informative article.
Related Resources
- Why do forex traders use multiple screens?
- The impact of the Barings collapse on bank trading floors
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.
