Floor trader

Floor trader
See also

Floor trader - is a member of a stock exchange who usually makes his money on a price spread between a price of the bid and a price of the ask. This kind of trader purchases options, futures or shares at the lower price and sells them at the higher price with a profit for himself [1].

The essence of a floor trading

Floor traders earn their own money on the ask or bid spread. They are that kind of people who spend (in many situations) nearly amount thousands of dollars in every month for the benefit of being on the level of the floor of the exchange (thousands or hundreds to get a seat). These traders could rent the seats or purchase the seats, achieving a right to buy or sell as a member of the exchange. Also, they could spend all day generating liquidity for the not trading on exchange floor investors. Due to this activity, traders want to get a benefit in return. This benefit is the advantage of making money on the spread. The money connected with the spread is from the distinction between the offer and the bid price. Besides, being right where the work allows them to perceive the order flow. This flow od order in the purchasing and selling is appearing around them. They could recognize when big, important traders are participating. This does give them disadvantages. [2]. These difficulties include the following five points [3] :

  • a need to constantly be in a market to cover costs;
  • high monthly expenses;
  • very mentally and physically demanding work;
  • misses chances in other markets;
  • getting caught up not in fact, but an emotion.

" Floor traders use a variation of this system " [4].

Training programs addressed to floor traders

Programs are created to provide floor traders with owned demanded knowledge and abilities to trade contracts. This is the main purpose. When there is no special institutional training requirement, it is a privilege to get a degree od A-levels. Everyone should know that floor trading is an exciting and always high-pressure job. There are days that this kind of job could be stressful. Sometimes, while trading terms will differ from exchange to exchange, there is a need to work long hours [5].

Example of training program done by The London International Financial Futures and Options Exchange [6]. " The program comprises a preliminary induction course and one month's experience on the floor before any candidate becomes eligible to register for the Floor Traders Course. The induction course comprises a basic introduction to London International Financial Futures and Option Exchange, its structure and systems. The Floor Traders Course is taken in two stages addressing, successively, theory and practice" [7].

References

Footnotes

  1. Fontanills G. 2005 p.316
  2. Fontanills G. 2005 p.356
  3. Fontanills G. 2005 p.356
  4. Weintraub N. 1996 p.69
  5. Spence D. 1999 p.120
  6. Spence D. 1999 p.120
  7. Spence D. 1999 p.120

Author: Aleksandra Zegiel