A trading desk is a financial institution that facilitates the buying and selling of securities between investors. There are different types of trading desks, but they all serve the same purpose: to provide a marketplace where buyers and sellers can come together and trade securities.
In this article, we will discuss what a trading desk is, what it does, and how it works. We will also explore the different types of trading desks and answer the question: does Goldman Sachs have a trading desk?
What is a trading desk?
A trading desk is a financial institution that facilitates the buying and selling of securities between investors. Trading desks provide a marketplace where buyers and sellers can come together and trade securities.
There are different types of trading desks, but they all serve the same purpose: to provide a marketplace where buyers and sellers can come together and trade securities. The most common type of trading desk is a stock exchange, but there are also commodities exchanges, options exchanges, and currency exchanges.
What does the trading desk do?
The trading desk is responsible for the buying and selling of securities. They act as a middleman between buyers and sellers, and they provide a place where investors can come to trade securities.
What is an electronic trading desk?
An electronic trading desk is a type of trading desk that uses electronic means to execute trades. This can include using computers to place orders, using electronic communications networks (ECNs) to place orders, or using direct market access (DMA) to place orders.
How a trading desk works
A trading desk typically works by matching orders. An order is an instruction to buy or sell a security at a certain price. Orders can be placed by phone, electronically, or in person. When a buyer places an order to buy a security, the trading desk will try to find a seller who is willing to sell the security at the same price.
If a match is found, the trade is executed and the securities are exchanged. If there is no match, the trading desk will hold the order until a buyer or seller is found who is willing to trade at that price.
Types of trading desks
There are a few different types of trading desks, but the most common ones are:
- The buy-side trading desk
- The sell-side trading desk
- The proprietary trading desk
Each type of desk has a different purpose, but they all work to execute trades on behalf of their clients. Let's take a closer look at each type of desk. The buy-side trading desk is responsible for executing trades on behalf of the buy-side firm's clients.
This could be anything from large institutional investors to small retail investors. The main goal of the buy-side trading desk is to get the best possible price for their client's orders. As the name implies, the sell-side trading desk sells securities on behalf of the firm's clients.
By having a professional "sell-side" trader, the firm can ensure that its clients are getting the best possible price for their securities. When they are not working on behalf of clients, sell-side traders will often trade for the firm's own account.
Selling assets for the firm's own account is often referred to as "proprietary trading." These desks are usually much more aggressive than the other desks and take on more risk. Now that you know a little bit about the different types of trading desks, let's take a look at some asset-specific trading desks.
Equity Trading Desk
The equity trading desk is responsible for the buying and selling of stocks. They work to get the best possible price for their client's orders and often trade for the firm's own account as well. The equity trading desk is usually broken down into two sub-groups:
- The institutional sales desk: This sales desk works with large institutional investors.
- The retail sales desk: Works with small retail investors.
Fixed Income Trading Desk
The fixed-income trading desk is a department in a financial services company that deals with trading fixed-income securities such as bonds, treasury bills, and other government securities. This trading desk is responsible for the buying and selling of these securities, which are traded on exchanges.
The traders who work on the trading desk are called dealers. Fixed-income trading desks are generally set up with different desks, each dealing with different types of debt instruments. For example, there may be a repurchase agreement desk that deals with repurchase agreements (repos), a mortgage-backed securities (MBS) desk that deals with mortgage-backed securities, and an asset-backed securities (ABS) desk that deals with asset-backed securities.
Forex trading desk
The foreign exchange (forex) market is a global decentralized market for the trading of currencies. This includes all aspects of buying, selling, and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the credit market.
The main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, except on weekends.
Since currencies are always traded in pairs, the foreign exchange market does not set a currency's absolute value but rather determines its relative value by setting the market price of one currency if paid for with another (Example: EUR/USD, USD/JPY).
To summarize, the foreign exchange trading desk is responsible for the buying and selling of currencies. They work to get the best price for their clients and they also trade for the firm's own account to diversify the income stream. The foreign exchange market is open 24 hours a day, five days a week. The dealers on the foreign exchange trading desk are usually divided into three shifts, each covering eight hours of the day.
Commodities Trading Desk
A commodities trading desk is a unit that buys and sells commodity contracts on behalf of clients in return for a commission or fee. The main types of commodities that are traded are:
- Energy (crude oil, gasoline, heating oil, natural gas)
- Precious metals (gold, silver, platinum)
- Industrial metals (copper, lead, zinc)
- Agricultural products (corn, soybeans, wheat)
How does a trading desk make money?
A trading desk makes money through the commissions and fees that it charges for its services. It also makes money by trading through its own accounts. When a trading desk trades for its own account, it is said to be "trading on its own behalf." This is different from "trading on behalf of clients," which is what the desk does when it is working to get the best possible price for its clients' orders.
The trading desk also makes money through the spread. The spread is the difference between the 'bid price' and the 'ask price' of security. For example, if the bid price of a security is $100 and the ask price is $102, then the spread is $2. The trading desk will make money if it buys the security at the bid price and sells it at the ask price.
The trading desk also makes money through arbitrage. Arbitrage is the practice of taking advantage of a price difference between two or more markets: buying in one market and selling in another.
This differs in the spread in that the trader is not looking to make a profit on the difference between the bid and ask price, but rather on the difference between the price in two different markets. The trading desk also makes money through markups.
A markup is an increase in the price of a security that is charged by the trading desk. For example, if the trading desk buys a security for $100 and then sells it to a client for $105, the markup is $5.
This is the most common fee when associated with individual investors. Lastly, the trading desk makes money through commissions. A commission is a fee that is charged by the trading desk for each trade that is made. For example, if the desk charges a commission of $0.01 per share, and the client buys 100 shares of a stock, the commission would be $0.01 x 100, or $1.
Does Goldman Sachs have a trading desk?
Yes, Goldman Sachs has many different types of trading desks. Goldman Sachs' most famous trading desks are the "Equity Trading Desk" and the "Commodities Trading Desk". As one of the largest investment banks in the world, Goldman Sachs has a large presence in many different markets and asset classes.
Electronic trading is also something that has been growing in popularity in recent years. Many trading desks now have electronic systems that allow for the buying and selling of securities to be done electronically. This allows for more efficient and faster trade execution.
Conclusion
If investing is something that you are passionate about, working at a trading desk may be the perfect career for you. With the potential to earn a high salary and the opportunity to work with some of the most talented people in the industry, a trading desk can offer you a unique and exciting experience.
While the hours can be long and the work can be stressful, the rewards can be great. If you are up for the challenge, working at a trading desk may be the perfect way to make a living. Institutions such as Goldman Sachs are often hiring talented individuals to work at their trading desks.
If you have the skills and the drive, working at a trading desk may be the perfect career for you. Do you have what it takes to work at a trading desk? Let us know in the comments below.
Image Source: Depositphotos